Kwon Do-hyung, the founder of a major cryptocurrency company in Korea, claimed innocence regarding new charges during his first appearance in a US court. Kwon made this claim on Thursday, January 2, local time, at the Manhattan federal court in New York after being extradited from Montenegro.

According to the indictment, Kwon is accused of deceiving investors into making large investments while founding a Singapore cryptocurrency company called Terraform Labs from 2018 to 2022. Known as the "Crypto King," Kwon caused significant losses to global investors after Terraform Labs' cryptocurrency collapsed in May 2022, amounting to $4 billion. Although he claimed that TerraUSD was a reliable "stablecoin," the cryptocurrency ultimately plummeted contrary to his assertions.

In court, Kwon only confirmed that he understood English and did not make any further statements. His attorney, Andrew Chesley, asserted that Kwon pleaded not guilty to both charges. The charges include conspiracy, securities and commodities fraud, electronic communications fraud, and an additional money laundering charge added on Thursday.

As the defense attorneys left the courtroom, they avoided making further comments. After agreeing to his detention, Kwon was transferred back to federal custody.

This indictment revealed that Kwon misled investors by claiming that Terraform Labs was developing innovative financial technology that would create a fully decentralized financial system. However, the indictment pointed out that Terraform Labs' core products did not function as advertised, and the portrayal of a properly functioning decentralized financial system was a deceptive tactic to attract investors.

What is the Luna Coin Incident?

In May 2022, the Luna Coin incident shocked the cryptocurrency market. The value of Terra (UST), a Korean cryptocurrency project, and its underlying coin Luna (LUNA) plummeted, causing massive losses to investors worldwide. This event is recorded as one of the most significant incidents in the cryptocurrency market.

Terra (UST) is an algorithm-based stablecoin designed to maintain a stable value of $1. However, in May 2022, as UST's price began to fall below $1, the situation rapidly deteriorated. Terraform Labs attempted to maintain the price by issuing or burning Luna in large quantities to protect UST's value, but this system failed to respond to the market's extreme volatility and ultimately collapsed.

The price of Luna dropped to mere cents within a day, resulting in significant losses for many who invested in Luna and UST. Particularly, as Luna's value approached zero, trust in the cryptocurrency market was severely shaken worldwide.

Following the incident, Kwon Do-hyung, CEO of Terraform Labs, faced legal action and was indicted in both Korea and the United States. Kwon denied responsibility for his company's actions, claiming "personal responsibility," but many investors argue that he is accountable for false promises and deceptive investment inducements.

This incident clearly demonstrated the risks that cryptocurrency projects like algorithm-based stablecoins can face, leading to increased calls for stricter regulations in the cryptocurrency market. It is also remembered as an event that reminded investors of the need to reassess the volatility and risks associated with cryptocurrencies.

Luna Coin Incident: Estimated Losses for American Investors in the Billions

American investors are reported to have suffered massive losses due to the Luna Coin incident in 2022. The collapse of Terraform Labs and Luna (LUNA) caused significant repercussions globally, particularly affecting investors in the United States. The estimated losses amount to billions of dollars.

Many Americans invested in TerraUSD (UST) and Luna, but due to the collapse of Luna and the devaluation of UST, their assets have essentially evaporated. Both individual and some institutional investors have incurred substantial losses. Affected investors have initiated class-action lawsuits against Kwon Do-hyung and Terraform Labs.

In particular, the U.S. Securities and Exchange Commission (SEC) is investigating Terraform Labs for selling unregistered securities, which could serve as a crucial basis for investors to seek legal remedies. Additionally, the U.S. government is raising calls for stricter regulations in the cryptocurrency market in light of this incident.

Kwon Do-hyung Faces Potential Heavy Sentences in U.S. Court

Attention is focused on the potential sentences Kwon Do-hyung, CEO of Terraform Labs, may face in U.S. court. Kwon has been indicted on several serious charges related to the collapse of Terraform Labs and Luna (LUNA), including securities fraud, commodities fraud, electronic communications fraud, conspiracy, and money laundering.

If convicted, Kwon could face up to 20 years in prison for each charge, and if multiple charges are applied simultaneously, the sentence could be significantly increased. In particular, the charges of securities fraud and commodities fraud could result in up to 20 years of imprisonment along with fines. Electronic communications fraud could also carry similar sentences.

Conspiracy and money laundering charges could lead to maximum sentences of 5 years and 20 years, respectively. Therefore, if found guilty on all charges, Kwon could potentially face decades in prison.

This incident has caused significant harm to global investors due to the collapse of Luna Coin and TerraUSD (UST), leading to a severe erosion of trust in the cryptocurrency market, and public interest in the potential sentences is growing.

The ruling in U.S. court could also influence legal proceedings in other countries, so depending on future developments, Kwon's sentencing will likely receive increased attention.