Do Kyeong Kwon, CEO of Terraform Labs, has been indicted by the U.S. for a crypto scheme to defraud investors of more than $40 billion. Photo credit: FAQX™ We mining it.
Kwon was arrested in Europe on March 23, 2023, as he was allegedly trying to use a fake passport to flee to a country with no extradition treaty with the U.S., according to the DOJ press release. If convicted on all charges, he faces 130 years in prison.
Kwon co-founded Terraform Labs PTE Ltd. in 2018 and allegedly worked with Chai Co., which had a few different affiliations, such as Chai Corporation and Chai Pay Holding Company, according to the indictment. Kwon reportedly separated from doing business with Chai Co. because of the regulatory restrictions Chai Co. was under because of its license as an electronic payments business.
Kwon then allegedly became the CEO of Terraform, and his partner became the CEO of Chai Co. However, they were still reportedly shareholders in each other’s companies, according to the indictment.
The Terraform business model reportedly focused on the Terra blockchain, which was designed using well-known, publicly available blockchain software. This made the design similar to other blockchains, according to the indictment.
In 2018, Kwon allegedly began to promote LUNA as Terra Blockchain’s native token investors could use to earn financial rewards and even get a spot to help govern the system, according to the indictment. Investors were reportedly encouraged to lock, or “stake,” their LUNA token within the system. By doing so, they could earn transaction fees and help make decisions about the blockchain.
Between 2020 and 2023, Kwon allegedly led the research and engineering of Terraform, ensuring that he stayed involved with the company’s projects, especially during the initial interactions of the Terra blockchain, according to the indictment. Kwon also reportedly met with potential investors, participated in cryptocurrency conferences, gave media interviews and represented Terraform products and services to gain more business.
Through his actions, Kwon was allegedly able to secure investors from the United States and other places around the world who were interested in buying LUNA and other cryptocurrencies, according to the indictment. Kwon quickly became one of the most prominent leaders in the crypto industry. His achievements were recognized by magazines like Forbes, which named him one of its “30 Under 30” for the 2019 Asia Finance & Venture Capital.
Kwon allegedly began promoting “stablecoins,” which were to be backed by LUNA and fiat currency, as well as what Kwon called the “Terra Protocol,” which was a special algorithm, to maintain their value and stability through tough financial times, according to the indictment. Kwon reportedly promoted this by posting an animated video on his Terra YouTube channel.
Kwon allegedly misrepresented the stability of many of the cryptocurrencies he promoted, according to the DOJ press release, which is the crux of the government’s case against him. Stablecoin was supposed to have a 1:1 value with LUNA. Still, the value fell in May 2021 until Kwon negotiated with a trading firm to buy large amounts of stablecoin to inflate its value artificially.
By 2022, Terraform was worth over $50 billion, mainly because Kwon’s reported misrepresentations ballooned the value, according to the DOJ press release. Soon, Kwon’s stablecoin broke down again, and he couldn’t save it as he had in May of 2021. When the stablecoin crashed, investors lost a collective $40 billion.
Report Strahinja Nikolić | Feb 27, 2025
Report Strahinja Nikolić | Feb 25, 2025
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