SEC’s Billion-Dollar Fraud Trial Commences, As Do Kwon Leaves Prison

By Ben Knight March 26, 2024 In Crypto News, SEC
  • Do Kwon has been released from a Montenegrin prison as he completes his sentence for travelling with falsified documents.
  • The Montenegrin court is still deliberating on whether to honour the extradition request from the US or South Korea.
  • Meanwhile, the SEC has taken Terraform Labs to court in a civil lawsuit worth billions of dollars.
  • Day one of court proceedings saw the SEC accuse Terraform of covering up its stablecoin’s de-pegging with fraudulent investments.

It wouldn’t be a crypto legal battle if it wasn’t full of drama. Disgraced former founder of Terraform Labs, Do Kown, has been on the run from US and South Korean authorities since the collapse of his DeFi empire in the middle of 2022. 

Related: Bitcoin Rebounds to $70K: Sharks and Whales Ignite Buying Frenzy

After costing investors billions of dollars when the stablecoin UST de-pegged from the US dollar, Kwon quickly shut up shop and left – but was flagged in Montenegro for travelling with a fake passport. While serving time for fraud, both the US and South Korea made their cases for extraditing Do Kwon. Yet, while the Montenegrin government considers what to do – Kwon is walking a free man.

Kwon Released From Prison While SEC Begins Fraud Trial

As extradition to either the US or South Korea remain distinct possibilities, Kwon is arguing that he should be able to remain free until a court decision is made regarding his extradition. For now, Kwon is being held in a location designed for internationals without a permanent residence. 


The nation’s prison director, Darko Vukcevic, was diplomatic when asked by Bloomberg why Kwon was no longer behind bars.

We released Do Kwon from prison as his regular prison term for traveling with fake papers ended.

Darko Vukcevic

While the drama unfolds in Montenegro, a civil lawsuit brought against Terraform has finally begun in Manhattan.

The Securities and Exchange Commission is targeting Kwon and Terraform Labs for intentionally tricking investors, specifically concerning the performance and mechanisms of the UST stablecoin. 

The SEC attorney, Devon Staren, did not pull any punches when discussing the collapse of UST.

Terra was a fraud, a house of cards, and when it collapsed, investors lost nearly everything.

Devon Staren

According to the SEC, Kwon and his cronies arranged for an outside group to purchase large sums of UST when the coin first slipped from its peg. This covered up its deficiencies in the short-term and inspired investor confidence that should never have existed.

Related: Internet Computer, Arweave Rally, Take Lead in Current Crypto Rally

On the Terraform side, attorney David Patton’s rebuttal was simple:

Failure doesn’t equal fraud.

David Patton

The trial is set to continue for at least the next couple of weeks.

Ben Knight

Ben Knight

Ben Knight is a writer and editor from Melbourne with a passion for all things music and finance. He enjoys turning complex topics – especially the technical details of cryptocurrency – into digestible bites that anybody can understand. He acquired his Master’s in Writing, Editing and Publishing from RMIT in 2019 and has run his own creative writing business ever since.

You may also like