U.S. Department of Justice extradites Terraform co-founder Do Kwon to face federal fraud and money laundering charges tied to over USD 40 billion in investor losses

The U.S. Department of Justice announced that Do Hyeong Kwon, co-founder and former chief executive officer of Terraform Labs PTE Ltd., was extradited from Montenegro and appeared in the Southern District of New York to face federal fraud charges. A superseding indictment unsealed in Manhattan alleges that Kwon ran multiple schemes to deceive investors and fraudulently inflate the value of Terraform’s cryptocurrencies, with losses of over USD 40 billion following the May 2022 crash. The indictment alleges, among other conduct, misrepresentations about the Terra Protocol’s ability to maintain TerraUSD’s (UST) USD 1 peg, including an agreement with a high-frequency trading firm to purchase UST to artificially support the peg after a May 2021 de-pegging event. It also alleges false claims about the independence and governance of Luna Foundation Guard Ltd. (LFG) alongside misappropriation and laundering of hundreds of millions of dollars; deceptive statements and market manipulation involving Mirror Protocol synthetic assets; false claims that the Terra blockchain processed transactions for the Korean payments application Chai; and use of at least USD 145 million in “Genesis Stablecoins” to fund fake Chai blockchain transactions and trading bots. Kwon is charged with commodities fraud, securities fraud, wire fraud, related conspiracies, and money laundering conspiracy, with stated maximum penalties totaling up to 130 years if convicted. The case is assigned to U.S. District Judge John P. Cronan, with an initial conference scheduled for Jan. 8 at 10:30 a.m. ET. The FBI is investigating with assistance cited from the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, and the Justice Department noted that the indictment is an allegation and defendants are presumed innocent until proven guilty.