US Prosecutors Scale TerraUSD Collapse Impact Ahead of Do Kwon Court Return

Key Takeaways

• U.S. prosecutors estimate that the total number of victims in the TerraUSD collapse may exceed one million.
• Terraform Labs co-founder Do Kwon was extradited to the U.S.
• Kwon faces nine felony charges, including fraud, criminal conspiracy, and money laundering.

The collapse of the Terra-Luna ecosystem continues to unfold as U.S. prosecutors shed new light on the scale of its impact.

In a recent court filing , federal prosecutors outlined the difficulty in reaching victims of the catastrophic event, estimating that more than one million people could have been affected by the TerraUSD collapse.

The Fallout From TerraUSD

Do Kwon, co-founder of Terraform Labs, is at the center of the scandal.

Extradited from Montenegro in December, Kwon made his first appearance in a U.S. federal court on Jan. 2, where he pleaded not guilty to nine felony charges, including fraud, criminal conspiracy, and money laundering.

These charges stem from his involvement in the collapse of TerraUSD, an algorithmic stablecoin that lost its peg to the U.S. dollar in May 2022. The crash triggered a domino effect, causing the fall of the entire $40 billion Terra-Luna ecosystem.

As prosecutors continue to build their case, the number of victims remains a key concern.

Victims Likely To Number Over One Million

According to the U.S. District Court for the Southern District of New York, prosecutors estimate that more than one million individuals and entities could be victims of the TerraUSD collapse.

The government has acknowledged that the sheer scale of the collapse makes it nearly impossible to notify every affected individual.

Acting U.S. Attorney Daniel Gitner proposed a solution: creating a public website to provide case updates and notify victims about public proceedings.

This digital platform, hosted by the Office of the U.S. Attorney for the Southern District of New York, would serve as the primary method of communication for those impacted by the collapse. Victims who wish to participate in proceedings can file a notice to be heard.

“The government will inform potential victims of all public court proceedings by posting notice of those proceedings on the website,” the motion stated.

While the plan aims to preserve victims’ rights, it acknowledges the practical limitations of direct communication in a case of such magnitude.

Facing Decades Behind Bars

Do Kwon’s legal troubles are only beginning. He faces multiple charges, including two counts of commodities fraud and two counts of securities fraud. If convicted, Kwon could face up to 50 years in prison.

The collapse of the Terra ecosystem was one of the most significant events in crypto history.

As the collapse unfolded, Kwon evaded arrest, leading to months on the run until his capture in Montenegro in March 2023. After a prolonged legal battle over his extradition, the U.S. secured his return in December.

As Kwon faces further legal battles, the full extent of the collapse and its victims is likely to become clearer in the coming months. His next court appearance is scheduled for Jan. 8.