The Rise and Fall of a Cryptocurrency Business Co-founder
Do Hyeong Kwon, the co-founder and former CEO of a cryptocurrency business, has been extradited to the US to face fraud charges. The South Korean national, aged 33, appeared in a Manhattan court after being extradited from Montenegro. His alleged actions between 2018 and 2022 resulted in losses of over $40 billion for investors in Terraform cryptocurrencies.
Fraudulent Activities and False Claims
The Department of Justice (DoJ) accuses Kwon of knowingly making false claims about Terraform’s products, creating a facade of a fully functioning and stable decentralized finance system. This false impression inflated the value of Terraform cryptocurrencies, which Kwon then allegedly sold to investors in exchange for billions of dollars’ worth of other assets.
Kwon is said to have made several misrepresentations, including:
- The effectiveness of the “Terra Protocol” in maintaining a peg between the firm’s stablecoin (UST) and the US dollar
- The management of the Luna Foundation Guard by an independent governing body to deploy financial reserves to defend UST’s peg
- The success of the investing platform “Mirror Protocol” operating on Terraform’s blockchain
- The relationship between Chai and the Terra blockchain, with false claims about Chai processing billions of dollars’ worth of transactions
- The misuse of one billion stablecoins (“Genesis”) programmed into the Terra blockchain for fake Chai transactions
The Unraveling of the Scheme
The dollar peg of UST began to falter in May 2021, but Kwon managed to conceal the weaknesses in the Terra protocol. However, when the same issue resurfaced a year later, he was unable to cover it up, leading to a crash in the value of UST and Luna, another Terraform currency.
Facing Serious Charges
Kwon is now facing multiple charges of commodities fraud, securities fraud, wire fraud, and money laundering, with a combined maximum jail term of 130 years. His extradition and court appearance mark a significant step in holding individuals accountable for fraudulent activities in the cryptocurrency space.
For more information on cryptocurrency fraud, you can also read about the SEC charges against a man involved in a $42 million crypto fraud scheme.