Terraform Co-Founder and Former CEO Extradited to Face U.S. Federal Crypto Fraud Charges

• Terraform’s former CEO was accused of extensive fraud and laundering crime proceeds regarding the company’s cryptocurrencies.
• The individual lied about Terraform’s blockchain technology and cryptocurrency products for four years.
• The collapse of Terraform’s digital assets reportedly resulted in over $40 billion in investor losses.

The co-founder and former CEO of Terraform Labs PTE Ltd. was extradited from Montenegro to face multiple federal fraud charges. Between 2018 and 2022, the individual allegedly made false and misleading claims about Terraform’s blockchain technology and cryptocurrency products.

A superseding indictment, unsealed upon his arrival in the U.S., accuses Do Hyeong Kwon, 33, of orchestrating a series of fraudulent schemes to inflate the value of Terraform’s cryptocurrencies, which Kwon and associated entities controlled and sold for massive gains.

Key allegations from the superseding indictment say Kwon falsely touted the stability of the Terra Protocol, the backbone of Terraform’s stablecoin, TerraUSD (UST), artificially propping up the peg by purchasing UST in large volumes. 

Kwon claimed the Luna Foundation Guard Ltd. (LFG) was managed by an independent board with the sole mission of defending UST’s peg through financial reserves, promoted Terraform’s Mirror Protocol as a decentralized platform for trading synthetic assets pegged to U.S. stocks, and claimed the Chai app processed billions in financial transactions via Terraform’s blockchain.

Kwon purportedly diverted $145 million worth of Terraform’s Genesis Stablecoins, earmarked for reserve purposes, to manipulate market metrics and simulate activity on Chai and Mirror Protocol.

At its peak in early 2022, Terraform’s cryptocurrencies, UST and LUNA, had a combined market valuation exceeding $50 billion, largely bolstered by Kwon’s alleged market manipulation and deceptive marketing. 

However, by May 2022, the UST peg collapsed, resulting in widespread losses for investors. The subsequent market crash erased over $40 billion in value, exposing the systemic weaknesses and fraudulent practices behind Terraform’s operations.

Kwon reportedly disseminated a falsified third-party audit and laundered proceeds through complex international financial transactions involving blockchains, cryptocurrency exchanges, and a Swiss bank account to conceal his activities following the collapse. 

The individual faces federal charges that include conspiracy to commit commodities, securities, and wire fraud counts and money laundering conspiracy. If convicted on all counts, Kwon could face a maximum prison sentence of 130 years.

Kwon was apprehended in Montenegro on March 23, 2023, while attempting to travel with a fraudulent passport. A citizen of the Republic of Korea, the individual arrived in the U.S. on December 31, 2024. Kwon is scheduled for an initial conference on January 8, 2025. 

In November, a New York man was sentenced to five years in prison concerning the Bitfinex breach on accusations of infiltrating Bitfinex and exfiltrating crypto totaling around 120,000 bitcoin.