The indictment alleges that between 2018 and 2022, Kwon deliberately misled investors worldwide, convincing them to invest billions in Terraform Labs, the Singapore-based crypto firm he co-founded. Terraform Labs promoted its flagship product, TerraUSD, as a “stablecoin” designed to maintain a stable value. However, the ecosystem’s collapse in May 2022 wiped out $40 billion in investor funds, shaking global crypto markets.

Prosecutors accuse Kwon of constructing a façade of innovative financial technology, claiming that Terraform Labs had created a decentralized financial ecosystem complete with its own money, payment systems, stock market, and savings bank. In reality, the indictment asserts, these claims were fabricated.

“Core Terraform products did not work as Kwon advertised and were manipulated to create the illusion of a functioning and decentralized financial system,” the indictment reads. It also alleges that these deceptive practices were used to mislead investors, users, business partners, and regulators.

Kwon faces charges of conspiracy, securities fraud, commodities fraud, wire fraud, and money laundering.

Court Appearance and Legal Strategy

During his court appearance, Kwon did not address the charges directly but confirmed his understanding of the proceedings. His attorney, Andrew Chesley, entered a plea of not guilty on his behalf, contesting the two separate indictments and their superseding versions. Defense attorneys have yet to comment publicly on their strategy or the specifics of the case.

For now, Kwon remains detained in a federal facility, with his legal team consenting to his detention.

The Global Fallout of Terra Luna’s Collapse

The TerraUSD collapse has become one of the most infamous events in crypto history. Marketed as a stablecoin, TerraUSD was designed to maintain parity with the U.S. dollar, but its algorithmic structure and reliance on Luna as collateral proved unsustainable. When TerraUSD lost its peg, a domino effect triggered the collapse of the entire Terraform ecosystem, devastating countless investors.

Regulators and law enforcement agencies across the globe have scrutinized Kwon’s activities since the collapse, with South Korea, the United States, and Montenegro all playing roles in his detention and extradition.