Kwon pleaded guilty to charges of fraud and conspiracy to commit wire fraud. Engelmayer noted that when UST lost its peg in May 2021, Kwon falsely claimed that an algorithm had restored its value, while secretly arranging for a trading firm to purchase millions of dollars in UST to artificially inflate its price. The judge also criticized Kwon’s mocking behavior on social media, citing a Twitter post where he belittled investors.

Court Proceedings and Kwon’s Flight Attempts

During the trial, Engelmayer reviewed Kwon’s attempts to evade the law. Kwon traveled on false passports to Serbia and Montenegro before being caught en route to Dubai. The court described this as “despicable,” especially since he publicly encouraged retail investors to hold UST while he and close associates exited their positions.

Following the sentencing, Jay Clayton, head of the Southern District of New York for the U.S. Department of Justice, stated: “Do Kwon devised complex schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit. Once exposed, he conducted a deceptive PR campaign, laundered proceeds from illegal schemes, and attempted to seek political protection abroad. Fraud is fraud, and our office will relentlessly pursue justice for investors, regardless of where perpetrators flee.”

In August, Kwon admitted to conspiring to commit commodities fraud, securities fraud, and wire fraud connected to Terraform Labs’ operations. In court, he acknowledged that he knowingly participated in a plan to defraud UST buyers. Kwon also expressed remorse: “I want everyone to know I have spent all my time thinking about what I could have done differently and what I can do now. It has been four years since the incident, and I haven’t seen my family in three. I want to serve my restitution in my own country.”

Investors and Legal Implications

Judge Engelmayer deemed the defense’s requested five-year sentence “utterly unreasonable.” He said even the government’s suggested 12-year term would not sufficiently deter Kwon or future fraudsters.

Factors considered in the court’s decision included:

• Total funds lost and number of victims

• Kwon’s attempts to evade the law

• Misleading and mocking conduct on social media

• Deceiving investors while protecting personal positions

The Terraform collapse is now recorded as one of the largest scandals in crypto history, and Kwon’s sentence sets a significant precedent for the digital asset industry.

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Malikie Innovations, which acquired over 32,000 patents from BlackBerry in 2023, has filed lawsuits against major Bitcoin mining firms Marathon Digital and Core Scientific. At the heart of the dispute lies elliptic curve cryptography (ECC), a core component of Bitcoin’s blockchain protocol.

Cryptography Under Scrutiny

According to Malikie, the ECC techniques used by Bitcoin are protected under patents they now hold. Their lawsuit claims that these mining companies have been infringing on their intellectual property by supporting Bitcoin operations with ECC-based methods.

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What’s more, Malikie seeks damages for up to six years of retroactive royalties. If awarded, the damages could be significant—possibly severe enough to force companies like Core Scientific into financial distress.

Could The Entire Network Be at Risk?

Experts suggest that a victory for Malikie might set a dangerous precedent. Other miners in the US could become targets, and the case could raise concerns over the legal stability of Bitcoin’s cryptographic foundation.

However, industry analysts like Niko Demchuk from AMLBot believe Malikie’s claims may not hold up. He suggests the patents in question may be expired or cover techniques predating Bitcoin’s implementation of ECC.

This is not the first intellectual property challenge in the crypto world. In the past, figures like Craig Wright have made failed attempts to claim ownership of Bitcoin’s underlying technologies. But this case serves as a reminder: even decentralized networks aren’t immune to centralized legal disputes.

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CLS Global Caught in FBI’s NexFundAI Trap

The FBI launched a fake token, NexFundAI, as part of an undercover investigation in May 2024. CLS Global, along with Hong Kong-linked ZM Quant Investment and Russia-linked Gotbit Consulting, agreed to provide fraudulent market-making services, manipulating token volume to deceive investors.

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The SEC filed fraud charges in October 2024 against CLS Global and its employee Andrey Zhorzhes.

What Is Wash Trading?

Wash trading involves artificially inflating trading volume by repeatedly buying and selling the same asset. This gives a false impression of demand.

A report from Chainalysis in January 2025 estimated at least $2.6B in wash traded volumes — about 2% of total daily crypto market volume.

However, the US National Bureau of Economic Research suggested in 2022 that up to 70% of activity on unregulated exchanges could be wash trading.

Who Is CLS Global?

Founded in 2017, CLS Global was created to fill the demand for “high-quality market-making solutions.” CEO Filipp Veselov, formerly of Latoken, leads the firm. Their CRO, Pavel Singaevskii, was previously with Stex, which allegedly shut down unexpectedly in 2023.

Despite the charges, CLS Global still operates and maintains over 110,000 followers on X.

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A US court has overturned the sanctions against the Tornado Cash cryptocurrency mixing protocol in a ruling that could signal a significant shift toward more innovation-friendly regulations for privacy-preserving technologies.

The US Treasury’s Office of Foreign Assets Control (OFAC) originally sanctioned Tornado Cash in August 2022, accusing it of facilitating money laundering by the North Korean Lazarus Group. The group was alleged to have laundered over $455 million in stolen digital assets through the protocol.

The sanctions led to the arrest of Tornado Cash developer Alexey Pertsev, who was found guilty of money laundering by Dutch judges at the s-Hertogenbosch Court of Appeal on May 14, 2024. Pertsev was sentenced to five years and four months in prison for laundering $1.2 billion in illicit assets through the platform.

In a significant legal development, the US District Court for the Western District of Texas reversed the OFAC sanctions, according to a Jan. 21 court filing. The court ruled:

“It is ordered and adjudged that the judgment of the district court is reversed, and the cause is remanded to the district court for further proceedings in accordance with the opinion of this court.”

Despite the victory for Tornado Cash, Pertsev remains in custody on money laundering-related charges.

During his trial in March 2024, Pertsev argued that he could not be held liable for the actions of users who used the Tornado Cash protocol for illegal activities.

The court rejected this defense, stating that Pertsev and the other co-founders of Tornado Cash could have implemented additional measures to prevent misuse of the protocol.

OFAC “overstepped” Its Congressional Authority: Tornado Cash Plaintiffs

The court ruling comes after six Tornado Cash users filed an appeal against OFAC’s sanctions.

The appeal, issued on Nov. 26, 2024, argued that OFAC overstepped its “statutory authority” by blacklisting Tornado Cash in 2022. The filing stated:

“We hold that Tornado Cash’s immutable smart contracts (the lines of privacy-enabling software code) are not the “property” of a foreign national or entity, meaning (1) they cannot be blocked under IEEPA, and (2) OFAC overstepped its congressionally defined authority.”

The six plaintiffs also argued that blockchain transactions can be traceable, which is why some crypto users “want additional options to keep their transactions private.”

The Tornado Cash sanctions raised significant concerns for developers of privacy-preserving technologies.

Matthew Niemerg, co-founder and president of AlephZero, stated that offering privacy-preserving features in a legally compliant manner will be crucial for the success of future privacy protocols.

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Value of Stolen Bitcoins from Hack Has Multiplied

The approximately 120,000 Bitcoin seized during the hack was worth $71 million at the time. However, when the US Department of Justice seized these assets in 2022, their value had increased to $3.6 billion. Today, the total value of these Bitcoins has reached approximately $12 billion.

Recovery Process and Developments

On July 6, 2023, Bitfinex received $312,219.71 in cash and 6,917 BCH from the US Department of Homeland Security. These funds will be used to repay the “Recovery Right Tokens” offered to investors following the attack.

On October 25, 2020, concerns arose when approximately $20 million worth of crypto was moved from wallets under US government control.

Legal Process and Status of Defendants

Defendants Ilya Lichtenstein and Heather Morgan were sentenced in November 2024 after pleading guilty to money laundering charges. Since their arrest in February 2022, authorities have recovered approximately $10 billion worth of stolen assets. Other seized assets will be subject to separate processes.

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