Do Hyeong Kwon, the South Korean cryptocurrency figure once hailed as the “crypto king,” appeared in a Manhattan federal court on Thursday, pleading not guilty to a newly unsealed indictment.
This marked his first US court appearance, two days after his extradition from Montenegro, and it set the stage for a legal battle over the spectacular collapse of his cryptocurrency venture.
The case has sent ripples through the crypto world as it grapples with issues of regulation, transparency, and accountability.
Allegations of deception and manipulation
The indictment alleges that Kwon deceived investors between 2018 and 2022, persuading them to pour money into Terraform Labs, the Singapore-based cryptocurrency firm he co-founded.
According to Associated Press report, authorities contend that investors worldwide were harmed by the $40 billion collapse of Terraform Labs’ cryptocurrency, a downfall that occurred despite the company’s claims that TerraUSD was a stablecoin that could be relied upon.
The collapse in May 2022 exposed the fragility of this claim, resulting in massive financial losses.
A complex indictment and a not guilty plea
During his court appearance, Kwon spoke only to acknowledge that he understood English.
His lawyer, Andrew Chesley, entered not guilty pleas to two versions of the indictment, which charge him with conspiracy, along with commodities, securities, and wire fraud.
A money laundering charge was also added on Thursday, further complicating the legal proceedings.
Chesley, along with another defense lawyer, David Patton, declined to comment as they exited the courtroom.
Their client was returned to a federal jail following their consent to his detention.
The illusion of a decentralized financial world
The superseding indictment accuses Kwon of deceiving investors by claiming that Terraform had developed unique, reliable financial technologies that could transform blockchain technology into a self-contained decentralized financial world complete with its own currency, payment system, stock market, and savings bank.
However, the indictment states, “In fact, Kwon’s constructed financial world was built on lies and manipulative and deceptive techniques used to mislead investors, users, business partners, and government regulators” about Terraform’s business.
It further states that, “Behind the scenes, core Terraform products did not work as Kwon advertised, and were manipulated to create the illusion of a functioning and decentralized financial system in order to lure investors.”
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