Terraform Labs’ Co-Founder and CFO Sentenced to Four Months in Prison for Passport Fraud

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Terraform Labs' Co-Founder and CFO Sentenced to Four Months in Prison for Passport Fraud
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Do Kwon, co-founder of Terraform Labs, has received a four-month prison sentence from a Montenegro court due to his participation in using a forged passport during travel.

Han Chang-joon, formerly the Chief Financial Officer (CFO) of Terraform Labs, has been sentenced to four months in prison for the same offense. The arrests in March revealed that both individuals were in possession of counterfeit Costa Rican and Belgian passports.

The court has taken into account the duration of their custody when determining the length of their sentences. However, it is worth noting that both individuals have the option to appeal the verdict within eight days of receiving written notification from the court, as per Bloomberg’s report.

In addition to the passport fraud charges, Do Kwon, co-founder of Terraform Labs, is also facing allegations of fraud in relation to the significant crash of the TerraUSD and Luna cryptocurrencies, which amounted to $40 billion in May 2022. This has resulted in extradition proceedings being initiated against Kwon, with the United States and South Korea seeking his return to face charges in their respective countries.

Terraform Labs Accused of Orchestrating Multi-Billion Dollar Crypto Asset Securities Fraud

Mr. Kwon and his company, Terraform Labs, are facing charges brought by the Securities and Exchange Commission (SEC) in February. The SEC alleges that they were involved in a fraudulent scheme that spanned from April 2018 until its collapse in May 2022, encompassing a multi-billion dollar crypto asset securities fraud.

According to the complaint filed by the SEC, Terraform Labs and Do Kwon raised significant funds from investors during this period through the offering and sale of interconnected crypto asset securities, many of which were unregistered transactions.


The complaint specifically highlights the sale of various securities, such as “mAssets,” which were security-based swaps designed to replicate the stock prices of US companies. Additionally, Terra USD (UST), an “algorithmic stablecoin” that claimed to maintain its value through exchangeability for another crypto asset security called LUNA, is also mentioned in the complaint.

According to the SEC’s complaint, Terraform Labs and Kwon are accused of promoting crypto asset securities to investors with the promise of potential profit, repeatedly asserting that the tokens would experience value appreciation.

Furthermore, during the marketing of the LUNA token, Terraform Labs and Kwon allegedly provided misleading information to investors, falsely claiming that a prominent Korean mobile payment application utilized the Terra blockchain for transaction settlements, which would contribute to the value growth of LUNA. Simultaneously, Terraform Labs and Kwon are also accused of deceiving investors regarding the stability of UST.

In May 2022, the value of UST and its related tokens experienced a sharp decline, disconnecting from the US dollar and plummeting towards near-zero levels.

According to SEC Chair Gary Gensler, “We assert that Terraform Labs and Do Kwon did not furnish the public with comprehensive, equitable, and accurate information regarding a range of crypto asset securities, notably including LUNA and Terra USD. Furthermore, we allege that they engaged in fraudulent practices by repeatedly making false and deceptive statements to gain trust, ultimately leading to significant losses for investors.”


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