Unlock the Editor’s Digest without spending a dime
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
South Korean cryptocurrency mogul Do Kwon made his first look in a Manhattan courtroom on Thursday after the co-founder of bankrupt cryptocurrency agency Terraform Labs was extradited from Montenegro to face prison costs within the US.
A brand new indictment unsealed on Thursday provides a brand new rely of cash laundering to the eight original charges introduced final yr in opposition to Kwon — which included securities, commodities and wire fraud — over Terraform Labs’ 2022 collapse, which led to a $40bn washout of its TerraUSD and luna tokens.
The most recent indictment alleges Kwon gave a litany of false disclosures and lies to buyers, regulators and through social media a few vary of crypto merchandise and platforms linked to Terraform Labs. The brand new cost covers alleged conduct from 2022 to April 2024 and references wire and crypto transfers of greater than $10,000 in “criminally derived property”.
“Kwon’s constructed monetary world was constructed on lies and manipulative and misleading strategies used to mislead buyers, customers, enterprise companions, and authorities regulators relating to Terraform’s enterprise,” the indictment mentioned.
“Behind the scenes, core Terraform merchandise didn’t work as Kwon marketed, and had been manipulated to create the phantasm of a functioning and decentralised monetary system in an effort to lure buyers,” it added.
The collapse of the TerraUSD coin unleashed an unprecedented crash in crypto markets and sparked a South Korean investigation into Kwon. He was beforehand charged with fraud and breaches of capital markets legislation in his dwelling nation, prompting a world manhunt after authorities had been unable to find him.
Kwon was in the end arrested in Montenegro in 2023, after he was found making an attempt to journey to the United Arab Emirates, which doesn’t have an extradition treaty with the US, whereas utilizing a solid Costa Rican passport. US prison costs in opposition to him had been unsealed hours later.
Montenegro extradited Kwon to US officers and FBI brokers on Tuesday in an airport in Podgorica, the nation’s capital. South Korea additionally had requested his extradition.
Kwon has beforehand denied wrongdoing and entered a plea of not responsible throughout a quick courtroom listening to on Thursday. Attorneys for Kwon didn’t instantly reply to a request for remark.
TerraUSD was one of many largest stablecoins — crypto tokens pegged to actual property; on this case, the US greenback — on the time of its collapse.
The collapse of TerraUSD and an affiliated digital coin, luna, nearly in a single day marked the beginning of a brutal yr for cryptocurrencies, culminating with the downfall of FTX and its founder Sam Bankman-Fried in late 2022. Bankman-Fried has been convicted of fraud and is interesting in opposition to a 25-year jail sentence he acquired in March 2024 for stealing $8bn from crypto prospects.
Kwon and Terraform Labs in April had been discovered accountable for fraud in a civil case introduced by the Securities and Change Fee, and the regulator in June secured a $4.5bn penalty to be paid by the corporate and Kwon through a settlement. The corporate filed for Chapter 11 chapter safety in January.
