Do Kwon, co-founder of Terraform Labs, is at the centre of a landmark legal case following the collapse of the Terra ecosystem. U.S. prosecutors estimate that the fallout from Terra’s failure may have impacted over one million individuals and entities worldwide.
This revelation was presented during a court hearing in New York City on January 6, 2025, where Kwon faces nine felony charges related to fraud at Terraform Labs.
Over 1 Million Victims & Counting
The U.S. government, represented by Acting Attorney Daniel Gitner, outlined the challenge of notifying such a vast number of victims about their rights under the Justice for All Act of 2004.
In court filings, Gitner emphasized the global scale of the Terra ecosystem’s collapse and the impracticality of traditional notification methods.
To address this, prosecutors proposed the creation of a public website to share updates on Kwon’s case proceedings and ensure transparency for victims.
Terra’s Rise and Devastating Fall
The Terra ecosystem, once hailed as a revolutionary force in cryptocurrency, met its downfall in May 2022.
Kwon’s ambitious vision included creating a stablecoin designed to compete directly with fiat currencies and fostering a blockchain ecosystem that promised transparency and decentralization.
However, these promises unravelled catastrophically when Terra’s valuation plummeted by $50 billion in just 72 hours. Investigations revealed that Kwon and his team allegedly manipulated the market and misrepresented the capabilities of their blockchain products.
Also Read: Montenegro’s Constitutional Court Suspends Extradition Of TerraLabs Founder Do Kwon
The U.S. Department of Justice (DOJ) accused Kwon of orchestrating fraudulent schemes to deceive investors, ultimately leading to his extradition from Montenegro to the United States in early 2025.
Victim Outreach Challenges
Given the global reach of Terraform Labs and its substantial user base, prosecutors believe the number of victims could exceed one million.
Many transactions involving Terraform’s cryptocurrencies were conducted through foreign exchanges or anonymous digital wallets, further complicating efforts to identify and notify affected parties.
Gitner acknowledged these challenges in a court filing, stating, “The government estimates that the number of victims in this case exceeds hundreds of thousands of individuals and entities, and potentially totals more than one million.”Â
The proposed victim notification website aims to streamline communication, ensuring affected individuals can access case updates and exercise their rights without overwhelming court processes.
A Case of Unprecedented Magnitude
Do Kwon’s trial represents one of the largest fraud cases in cryptocurrency history. It highlights the risks of unregulated platforms and the potential consequences of mismanagement in the digital asset industry.
During his initial court appearance on January 2, 2025, Kwon pleaded not guilty to the charges against him.
As the case unfolds, the proposed victim notification website is expected to play a critical role in maintaining transparency and ensuring compliance with victims’ rights.
The outcome of this trial could set a precedent for future cases involving large-scale fraud in the cryptocurrency sector, underscoring the importance of accountability and investor protection in a rapidly evolving market.
Also Read: SEC Charges Touzi Capital and CEO in $115M Crypto Mining Fraud Scheme