Do Kwon trial: another crypto boy faces US fraud charges

Terraform's co-founder to face trial in 2026

Cryptocurrency exchanges and different businesses in the industry have been falling in recent years. It was all new and unknown years ago when it got popularized, but now the regulations and particular restrictions and laws get to be introduced.

People seek to regulate the cryptocurrency industry and digital asset processes for a reason. Those more often rely on data, money security, and fairness across the industry. Unfortunately, some unfair practices are revealed when investigations start and rules are implemented.

In other cases, cryptocurrency businesses fail independently due to the lack of regulations or knowledge on the founder's end. We have already seen what happens with poorly managed businesses like FTX or Binance. So-called golden boys failed majesticly.

Another cryptocurrency billionaire and one of the first investors in the field, co-founder of Terraform, Do Kwon faces charges and is preparing for the trial next year. The two-year drama on extradition is ending; he pleaded not guilty last week^[1].

Kwon has spent the past 22 months in custody in Montenegro

Terraform Labs co-founder and former CEO Do Kwon is set to face trial in the U.S. in January next year. The extra time will allow prosecutors and his defense team to review a massive six-terabyte evidence collection.

At a hearing in Manhattan on Wednesday, lead prosecutor Jared Lenow explained that delays are expected due to difficulties accessing encrypted data and unlocking four cell phones handed over by Montenegrin authorities when Kwon was extradited to the U.S. on December 31st. Additionally, some materials need to be translated from Korean^[2].

Kwon, who was arrested in Montenegro in March 2023 while trying to fly to Dubai with a fake passport, pleaded not guilty to a nine-count indictment last week. The charges include securities fraud, wire fraud, commodities fraud, and money laundering conspiracy, all linked to the $40 billion collapse of the Terra/LUNA ecosystem in 2022.

His extradition was uncertain for months because Montenegrin courts initially ruled that he should be sent to South Korea instead. However, U.S. authorities pushed for extradition, arguing that the severity of the crimes and where they were committed justified his transfer to the U.S. Montenegro’s Ministry of Justice later ruled in favor of the U.S., stating that most legal criteria supported their request.

The crash that triggered a domino effect in the sector

His road to trial has been long and complicated, but the $40 billion collapse of TerraUSD and Luna in 2022 reshaped the crypto industry, triggering multiple bankruptcies—including the downfall of FTX.

Sam Bankman-Fried, founder of FTX, was extradited from the Bahamas and sentenced to 25 years in prison. Now, Do Kwon faces a similar fate as he prepares for trial in the U.S.

Reacting to the news, crypto investor Mario Nawfal wrote on X (formerly Twitter):"Do Kwon’s extradition is official—he’s heading to the US after a long legal ride. His TerraUSD and Luna tokens crashed in 2022—burning $40B and sparking the crypto meltdown that wiped out $400B. It’s officially over for Kwon—but the damage to the market lingers."

Meanwhile, reports have linked Kwon to Montenegrin political figures, including Milojko Spajic, leader of the Europe Now party. Local media suggest possible financial ties, adding another layer of controversy to his case^[3].

Earlier this year, a New York jury found Kwon liable for fraud in a civil case filed by the SEC, resulting in a $4.5 billion penalty for Terraform Labs and a $200 million fine for Kwon himself. However, the upcoming criminal trial in the U.S.—which requires a higher burden of proof—will be his biggest challenge yet.

Last week, Kwon lost his final appeal against extradition. U.S. prosecutors accuse him of misleading investors and concealing assets following the TerraUSD collapse. With Terraform Labs now bankrupt, Kwon's legal battles are far from over.