A quick refresher: TerraUSD (UST) was an algorithmic stablecoin pegged to the value of one U.S. dollar. It maintained this value through Luna (LUNC), the ecosystem's second token, which had a free-floating value. Luna's price would rise or fall and holders would still be able to swap for $1 worth of UST.
You can click here to read more about how this system worked.
In December 2021, CoinDesk's Christine Lee asked Kwon whether a major crisis might destabilize the assumptions underlying Terra/Luna. In response, Kwon said, "the same argument could apply to any currency regime. For the same reason, would you deprive developing countries of the ability to have sovereign monetary policy? And I think the answer is no."
A few months later, UST lost its peg and Luna lost billions in market capitalization. Overall, tens of billions of value disappeared within a few short days.
Kwon now faces securities fraud, wire fraud, commodities fraud, conspiracy and market manipulation charges for his role in Terraform Labs and the Terra system. According to an indictment unsealed earlier this week — though apparently returned in March 2023 — Kwon is accused of sharing "a false and misleading statement" during a TV interview about Terra's adoption. Prosecutors allege he defrauded investors into buying tokens issued by Terraform Labs, including Luna, which is described as a "digital security."
Kwon also allegedly worked to manipulate the price of Terra, prosecutors with the Southern District of New York charged.
In a hearing earlier this week, Assistant U.S. Attorney Jared Lenow told a federal judge that prosecutors already had six terabytes of data to produce during discovery, but needed time to access four different cell phones and view encrypted information, CoinDesk's Cheyenne Ligon reported.
A trial is tentatively set for next January, though this may change. Kwon has pleaded not guilty to all charges.
Kwon was already found civilly liable for fraud in a case brought by the U.S. Securities and Exchange Commission, and agreed to a $4.5 billion settlement.
