The impact of Do Kwon’s Terra LUNA collapse has been reported by US prosecutors to potentially extend to millions of investors, according to recent court filings.
It has been stated by US prosecutors that Terra’s founder, Do Kwon, is at the center of serious allegations. The prosecutors, led by US Attorney Daniel Gitner, revealed that the collapse of Terra in 2022 might have negatively impacted millions of users.
The claim was made in a January 6 filing with a New York District Court. In the disclosure, it was estimated that hundreds of thousands, and potentially millions, of investors were exposed to the Terra fallout.
Legal Proceedings Highlight Scale of Impact
Do Kwon, co-founder of Terraform Labs, is set to face an extensive legal process as a result of this case. His involvement in the failure of the project’s algorithmic stablecoin, TerraUSD, has been alleged.
The depegging of TerraUSD in 2022 triggered the crash of the network’s native token, LUNA. This collapse erased over $40 billion from the cryptocurrency market. The fallout also contributed to several bankruptcy filings by major digital asset firms with significant exposure to the Terra ecosystem.
Given the sheer number of victims, the prosecutors argued that assembling all affected parties for a fair trial would be impractical. Instead, it has been proposed by the government that a website be created to provide updates to affected entities on the legal proceedings.
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Additionally, victims of the $40 billion collapse are being encouraged to participate in the case. Those interested are allowed to testify against Do Kwon and Terraform Labs with supporting evidence.
Potential Penalties for Do Kwon
The trial of Do Kwon began on January 2, with the co-founder pleading not guilty to seven charges. These charges include two counts each of commodities and securities fraud. His trial follows a successful extradition to the US from Montenegro, which came after a lengthy legal battle with South Korea.
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If convicted, Do Kwon could face up to 50 years of imprisonment. This sentence would surpass the 25-year term given to FTX’s Sam Bankman-Fried for his role in the exchange’s collapse during the same year.
It has been noted that Do Kwon’s trial will take place in the same jurisdiction where prominent cryptocurrency figures such as Binance’s Changpeng Zhao and former Celsius CEO Alex Mashinsky have been tried. Legal proceedings are set to continue on Wednesday.
