It’s been reported that Montenegrin authorities arrested Kwon yesterday at an airport as he was attempting to board a flight using falsified documents. After his arrest and identification by Interpol, the international police organization, the US Justice Department unsealed an indictment that charges Kwon with eight counts of fraud. The United States office of the attorney in the Southern District of New York has expressed its intention to seek Kwon's extradition to face charges in the US. Terraform Labs co-founder Do Kwon charged with 8 criminal indictments
On March 23, 2023, the Grand Jury filed criminal charges against Do Hyeong Kwon, a/k/a "Do Kwon," the founder of Terraform Labs ("TFL"), in the Southern District of New York. The charges 8-counts, including conspiracy to defraud, commodities fraud, securities fraud, and wire fraud. The accusations focus on Kwon's alleged deceptive practices concerning the Terra blockchain, including its technology and the extent to which it had been adopted by users. Do Kwon Indictment
Count One: Conspiracy to Defraud
The Grand Jury alleges that from 2019 to 2022, Kwon conspired with others to commit offenses against the United States. The conspiracy involved engaging in commodities fraud, securities fraud, and wire fraud by defrauding individuals selling digital commodities in exchange for cryptocurrencies issued by TFL, including Terra LUNA ("LUNA") and TerraUSD ("UST").
Count Two: Commodities Fraud
The Indictment further alleges that Kwon, between 2019 and 2022, engaged in commodities fraud by directly and indirectly using a manipulative and deceptive device in connection with a swap and a contract of sale of a commodity in interstate and foreign commerce. The complaint alleges that Kwon deceived individuals selling digital commodities in exchange for cryptocurrencies issued by TFL, including LUNA and UST, about aspects of the Terra blockchain.
Count Three: Securities Fraud
The Indictment charges Kwon with securities fraud, alleging that he used manipulative and deceptive devices in connection with the purchase and sale of securities, specifically digital securities issued by TFL, such as LUNA. The deception involved aspects of the Terra blockchain, including its technology and adoption by users.
Count Four: Wire Fraud
Finally, the criminal complaint accuses Kwon of wire fraud, claiming that he knowingly devised and intended to devise a scheme to defraud purchasers of cryptocurrencies issued by TFL, including LUNA and UST. The alleged scheme involved deceiving individuals about aspects of the Terra blockchain through interstate wires.
Count 5 (Conspiracy to Defraud and Engage In Market Manipulation): Kwon and others are charged with conspiring to commit offenses against the United States, including commodities fraud, securities fraud, wire fraud, commodities manipulation, and securities manipulation. They allegedly deceived purchasers of cryptocurrencies issued by TFL about the algorithmic mechanism that ensured the stability of UST's price through false statements and market manipulation.
Count 6 (Commodities Fraud): Kwon is accused of using manipulative and deceptive devices in connection with a swap, a contract of sale of a commodity, and future delivery on a registered entity. The scheme involved defrauding individuals selling digital commodities for cryptocurrencies issued by TFL, such as LUNA and UST, by using market manipulation and false statements.
Count 7 (Securities Fraud): Kwon allegedly violated securities regulations by engaging in a scheme to defraud individuals purchasing digital securities issued by TFL, including LUNA, by deceiving them about the effectiveness and sustainability of the algorithmic mechanism that purportedly ensured the stability of UST's price.
Count 8 (Wire Fraud): Kwon is charged with devising a scheme to defraud purchasers of cryptocurrencies issued by TFL, including LUNA and UST, by deceiving them about the effectiveness and sustainability of the algorithmic mechanism that purportedly ensured the stability of UST's price, using wire, radio, and television communication in interstate and foreign commerce.
Do Kwon's native country, South Korea, has also expressed an interest in seeking his extradition. It now remains to be seen the United States and South Korea will resolve the matter and which jurisdiction will ultimately take precedence in Kwon's case. The process could involve diplomatic discussions and consideration of various factors such as the severity of the alleged crimes, the strength of each country's case, and potential extradition treaties in place. Extradition is the process by which one country surrenders a fugitive to another country where they are wanted for criminal charges. Stay tuned for more on this. Crypto Criminal Defense Lawyer Blog
This blog post was prepared with the assistance of ChatGPT-4 AI. Nothing in this post should be considered legal advice or the creation of an attorney-client relationship. This blog is strictly for informational purposes only.