Do Kwon Crypto Collapse May Have Affected Over a Million Victims

U.S. prosecutors have estimated that Do Kwon, the former co-founder of Terraform Labs, may have more than one million victims worldwide following the crash of the South Korean blockchain company.

In a January 6 filing with the U.S. District Court for the Southern District of New York, Acting U.S. Attorney Daniel Gitner outlined the steps to notify Kwon’s victims about their rights in relation to his ongoing criminal case.

Given the large number of affected individuals and organizations, the U.S. government intends to create a specialized website to provide updates, as alternative notification methods are deemed impractical.

“The Government does not have contact information for many of Kwon’s victims, and in any event the Government’s victim notification system is not capable of sending out victim notifications to hundreds of thousands or millions of victims,” Gitner stated in the filing.

Gitner noted the challenges in determining the exact number of victims because many transactions took place on international exchanges or through crypto wallets without identifiable details. Despite these obstacles, authorities estimate that the number of affected individuals and entities could reach several hundred thousand.

Do Kwon appeared before a U.S. judge for the first time on January 2 after he was extradited from Montenegro. He pleaded not guilty to nine felony charges related to fraud involving Terraform Labs and consented to be held in detention. His extradition marked the resolution of an extensive legal process spanning multiple jurisdictions.

Do Kwon Arrested for Fraud

Kwon was arrested by Montenegrin authorities in March 2023 after attempting to board a flight to Dubai with a counterfeit passport. He served a four-month prison sentence for the offense of document fraud.

In December 2024, Montenegro authorized Kwon’s extradition to the United States, bringing an end to a lengthy dispute with South Korea, where Kwon also faces criminal charges.

While in custody in Montenegro, a New York jury determined that Do Kwon and Terraform were liable in a $4.47 billion civil fraud lawsuit filed by the U.S. Securities and Exchange Commission (SEC). The case, which was linked to Terraform’s bankruptcy, emphasized how the collapse of the ecosystem contributed to widespread financial turmoil, including the downfall of FTX.

The collapse of the Terra ecosystem in May 2022 sparked a crisis in the cryptocurrency market. TerraUSD (UST), an algorithmic stablecoin intended to maintain a 1:1 peg with the U.S. dollar through its connection with the LUNA token, disastrously lost its dollar peg, leading to a widespread failure of the system.

The collapse of the TerraUSD peg triggered a rapid decline, wiping out more than $40 billion in market value within a matter of days.

This event significantly weakened confidence in the crypto sector, playing a key role in a wider market downturn that saw Bitcoin drop below $20,000 and Ethereum lose over 70% of its value.

Do Kwon is scheduled to appear in court again on January 8, marking the start of what prosecutors have called a pivotal case in cryptocurrency fraud.

Michaela has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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