A Manhattan hearing today saw Terraform Labs co-founder, Do Kwon, deny charges tied to the TerraUSD collapse.

Do Kwon, the co-founder the co-founder of Terraform Labs, pleaded not guilty to criminal fraud charges in a Manhattan federal court on Thursday after being extradited from Montenegro, according to Reuters.

The charges stem from his role in the collapse of the TerraUSD and Luna cryptocurrencies, which erased an estimated $40 billion in market value in 2022.

Do Kwon ‘misled’ investors

Federal prosecutors allege that Kwon misled investors about TerraUSD’s stability, claiming in 2021 that its value was maintained by a proprietary algorithm. Prosecutors assert that Kwon secretly used a high-frequency trading firm to artificially sustain the stablecoin’s $1 peg, according to Reuters. 

The indictment includes charges of securities fraud, commodities fraud, wire fraud, conspiracy, and money laundering.

The charges follow a turbulent year for Kwon, who fled as the Terra blockchain collapse triggered a wave of bankruptcies, including high-profile firms like Three Arrows Capital. 

Interpol issued a Red Notice for his capture, and he was arrested in Montenegro in March 2024 while attempting to board a flight with forged passports.

Montenegro’s Justice Minister recently approved Kwon’s extradition to the United States, ending months of legal wrangling between the U.S. and South Korea, both of which sought to prosecute him. Although Kwon now faces significant legal challenges in the U.S., South Korean authorities continue their investigation, which could lead to a 40-year prison sentence if convicted.

Kwon’s next court appearance is expected to outline further proceedings. His case remains a central topic in discussions about accountability within the cryptocurrency industry.

Incarcerated former FTX executive Ryan Salame appears to have already slashed a year off his prison sentence.

Data from the U.S. Federal Bureau of Prisons indicates Salame’s release date is now March 1st, 2031. The former co-chief executive of FTX Digital Markets reported to prison in October after being sentenced to 7.5 years behind bars, meaning he was initially scheduled for release around April 2032.

Salame pled guilty last year to conspiracy to make unlawful political contributions and defraud the Federal Election Commission (FEC), as well as conspiracy to operate an unlicensed money-transmitting business.

In May, District Judge Lewis A. Kaplan sentenced the former executive to 7.5 years behind bars, but a legal dust-up over the indictment of the mother of his child, Michelle Bond, delayed the start of his prison term.

FTX imploded and filed for bankruptcy in November 2022 amid accusations that founder and CEO Sam Bankman-Fried mishandled the exchange’s funds by loaning out billions of dollars worth of customer deposits to Alameda Research, the firm’s trading arm, to make risky crypto bets that went awry.

The exchange’s multi-billion dollar collapse led to a sharp downtick in crypto prices, and US federal authorities arrested Bankman-Fried the following month. In March, Judge Kaplan sentenced Bankman-Fried to 25 years in prison and three years of supervised release.

He also ordered the 32-year-old to pay $11 billion in forfeiture. Bankman-Fried is appealing his conviction and sentence.

Don’t Miss a Beat – Subscribe to get email alerts delivered directly to your inbox

Check Price Action

Follow us on X, Facebook and Telegram

Surf The Daily Hodl Mix

&nbsp

Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Generated Image: Midjourney

For all the complaints levied against the crypto-strict U.S. Securities and Exchange Commission (SEC), the agency successfully obtained orders for $8.2 billion in financial remedies for 2024.

This is despite a 26% decrease in total enforcement actions.

The successful prosecution of Terraform Labs helped the agency achieve this milestone. Once a jury verdict found Terraform Labs and founder Do Kwon liable for fraud, defendants agreed to a final judgment ordering them to pay more than $4.5 billion in penalties — the highest amount ever obtained by the SEC following a trial.

It accounted for more than half of the total monetary judgments, according to the details from the press release.

SEC’s 583 enforcement actions

The SEC’s enforcement efforts in 2024 showed significant shifts across multiple categories, with 583 total enforcement actions. This includes 431 stand-alone actions representing a 14% decrease, 93 follow-on administrative proceedings showing a 43% decrease, and 59 delinquent filing actions marking a 51% decline.

Despite the reduced number of cases, the financial impact reached these levels, combining $6.1 billion in disgorgement and prejudgment interest with $2.1 billion in civil penalties.

In the cryptocurrency sector, the SEC pursued several major cases, including charges against Silvergate Capital for misleading BSA/AML compliance disclosures and action against Barnbridge DAO for unregistered securities offerings.

The agency also tackled the HyperFund pyramid scheme involving $1.7 billion and the NovaTech fraud case affecting 200,000 investors. Notable first-time enforcement actions targeted relationship investment scams involving NanoBit and CoinW6 platforms.

The SEC’s Division of Enforcement won all five federal district court cases, including its crypto-related trial against Terraform Labs. This success extended to investor protection measures, with 124 individuals barred from serving as officers and directors of public companies.

SEC Chair Gary Gensler emphasized the Division’s role as a “steadfast cop on the beat,” while Acting Director Sanjay Wadhwa noted increased market participant cooperation and self-reporting. 

The report somewhat justifies Gensler’s role as the top crypto enforcer. The outgoing SEC chair, set to resign on Jan. 20, faced harsh criticism from crypto enthusiasts and retail traders throughout his tenure for his regulatory approach.

And yet, the SEC distributed $345 million to harmed investors and processed a record 45,130 tips, complaints, and referrals, including over 24,000 whistleblower tips, resulting in $255 million in whistleblower awards.

The agency’s success in returning funds to investors has been substantial, with more than $2.7 billion distributed since fiscal year 2021.