Do Kwon, the 33-year-old South Korean entrepreneur behind the failed TerraUSD and Luna cryptocurrencies, pleaded guilty, on Tuesday, August 13th, in New York to two counts of conspiracy to defraud and wire fraud.
The plea came before U.S. District Judge Paul Engelmayer. Prosecutors said Kwon misled investors about the stability of TerraUSD, a so-called stablecoin meant to keep a value of $1.
The hearing marked a turning point in a case tied to one of the most dramatic losses in the history of digital assets, which wiped out an estimated $40 billion in 2022, Reuters reported.
Plea agreement and possible sentence
The founder of Singapore-based Terraform Labs had faced a nine-count indictment when he was arrested. He initially pleaded not guilty in January to charges including securities fraud, commodities fraud, wire fraud and money laundering conspiracy.
Under the agreement with the Manhattan U.S. Attorney’s office, Kwon admitted to the two counts in exchange for prosecutors supporting a sentence of no more than 12 years, provided he accepts full responsibility. Without that agreement, he could face up to 25 years in prison. Sentencing is scheduled for December 11.
Prosecutors detail the deception
Authorities said Kwon misled investors in 2021 when TerraUSD lost its $1 peg. At the time, he claimed a computer algorithm known as the Terra Protocol had restored its value.
In reality, prosecutors allege, a high-frequency trading firm had secretly purchased millions of dollars of TerraUSD to artificially support the price. That false narrative drove retail and institutional buyers into Terraform’s products, boosting Luna’s market value to $50 billion by spring 2022.
Manhattan U.S. Attorney Jay Clayton said in a statement that Kwon exploited the hype and optimism around blockchain technology to orchestrate “one of the largest frauds in history.”
Also Read: Terraform Labs’ Do Kwon Faces Delayed Trial, Defense Needs More Time to Review Evidence
Public apology in court
In court, Kwon apologised for his actions and admitted to misleading statements about the recovery of TerraUSD’s peg. “I made false and misleading statements about why it regained its peg by failing to disclose a trading firm’s role in restoring that peg,” Kwon said. “What I did was wrong.”
The collapse of TerraUSD and Luna sent shockwaves through the crypto sector, contributing to a wider downturn that year. U.S. prosecutors estimate the fallout may have affected more than 1 million individuals and entities worldwide.
Previous settlement with the SEC
In 2024, Kwon and Terraform Labs reached a $4.55 billion settlement with the U.S. SEC. The agreement included an $80 million civil fine and a permanent ban on participating in cryptocurrency transactions.
Kwon has been held in custody since being extradited from Montenegro in late 2024.
Kwon also faces charges in South Korea, where authorities have been pursuing their case. As part of the U.S. plea deal, prosecutors will not oppose a request for Kwon to transfer abroad after serving half of his sentence in the United States.
Also Read: Terraform Co-Founder Do Kwon May Plead Guilty In U.S. Fraud Case Over $40B TerraUSD Collapse