Terraform Labs co-founder Do Kwon appeared in court on Jan. 2 in the US and pleaded not guilty to  fraud charges linked to the $40 billion implosion of the TerraUSD (UST) stablecoin, Bloomberg News reported. 

Kwon appeared before US Magistrate Judge Robert Lehrburger in Manhattan and agreed to remain in custody without bail. He faces nine charges, including wire, securities, and commodities fraud, stemming from his alleged role in Terraform Labs’ collapse after the price of its tokens, LUNA and UST, crashed.

After being arrested in Montenegro in March 2023 while attempting to travel on a fake passport, Kwon remained in the country during a tug-of-war between US and South Korean authorities over where he would face charges. Both nations had accused Kwon of fraud, with South Korea seeking extradition due to his citizenship.

Meanwhile, Kwon appealed to avoid extradition to the US, as financial crime penalties in South Korea are generally less severe.

Montenegro’s Constitutional Court rejected the appeal on Dec. 26 and the country’s Justice Minister subsequently signed an order to extradite the Terraform Labs co-founder a few days later.

On Dec. 31, the Montenegrin police transferred Kwon to US authorities at the Podgorica International Airport.

Awaiting trial

Prosecutors in New York allege Kwon misled investors about the Terra blockchain’s capabilities and adoption rates, claiming his actions directly contributed to the platform’s catastrophic collapse. 

The Manhattan US Attorney’s Office, which successfully prosecuted FTX co-founder Sam Bankman-Fried last year, is leading the case against Kwon. 

Moreover, Kwon is already facing legal consequences. A US jury found him and Terraform Labs liable in a civil fraud case brought by the Securities and Exchange Commission (SEC), resulting in a $4.47 billion settlement. Terraform subsequently filed for bankruptcy.  

Kwon’s attorney declined to comment after the hearing. A follow-up court conference is scheduled for January 8, setting the stage for what could be a high-profile crypto trial in the Southern District of New York.  

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