U.S. prosecutors have estimated that Do Kwon, co-founder of Terraform Labs, may have defrauded more than 1 million victims worldwide following the catastrophic collapse of the Terra ecosystem. This claim came during a court hearing in New York on January 6, 2025, where Kwon was charged with nine criminal counts related to his role in Terraform Labs’ operations.
The government, represented by Acting U.S. Attorney Daniel Gitner, has filed a motion seeking court approval to notify victims of their rights under the Justice for All Act of 2004.
Due to the large number of potential victims, traditional notification methods were deemed impractical. Attempting to reach more than a million people through direct contact or mail notifications would have required enormous resources and time.
However, public notices and dedicated websites proved more effective in disseminating information to affected parties. As a result, the government has proposed setting up a public website to manage litigation and victim notifications.
The Justice for All Act of 2004 expanded the rights of crime victims in federal criminal proceedings by mandating timely notice and the ability to participate in public court events.
According to the document, victims have the right to protection from the accused, the right to consult with the prosecutor and redress, if applicable.
To exercise these rights, victims can submit written statements to the court, attend public hearings and communicate directly with the US Attorney’s Office handling the case.
In addition, they can access updates and resources through a designated online platform that will provide detailed steps on how to participate in sentencing or redress processes.
Section 3771 of the law provides victims with several key rights. Victims have the right to reasonable protection from the accused, protecting them from potential intimidation or harm throughout the legal process.
In addition, victims have the right to be heard during critical phases, such as the processing of guilty pleas, sentencing or parole hearings, ensuring that their voices contribute to the outcome of the legal proceedings.
Moreover, Section 3771 guarantees victims access to full compensation and requires that court proceedings proceed without unreasonable delays. However, the law recognizes the logistical difficulties in cases involving extensive groups of victims.
In such cases, the courts may opt for an alternative. Given the massive scale of the Terraform debacle, the government plans to publish case updates on the US Attorney’s website.
This online platform will allow potential victims to monitor court dates and assert their rights if necessary.
Terraform collapse and Kwon’s legal problems
The collapse of Terraform Labs in 2022 wiped out more than $40 billion in investor funds, leaving countless retail and institutional investors in trouble. The event led to the bankruptcy of several cryptocurrency hedge funds and exchanges and prompted increased regulatory scrutiny.
Terraform’s blockchain technologies, including the algorithmic stablecoin TerraUSD, were advertised as revolutionary components of decentralized finance (DeFi). However, prosecutors allege that Kwon misled investors with false practices, creating the appearance of stability and technological advances.
In fact, a recent report shows that Do Kwo could receive up to 130 years in prison on all charges.
