TLDR
- Do Kwon pleads guilty to conspiracy and wire fraud charges after TerraUSD collapse.
Kwon’s actions led to a loss of $40 billion, affecting investors globally.
Kwon faces up to 25 years in prison but could get 12 years with cooperation.
The crypto mogul’s guilty plea marks a pivotal moment in the TerraUSD legal case.
Terraform Labs co-founder Do Kwon has pleaded guilty to two major fraud charges in connection with the collapse of TerraUSD, a popular algorithmic stablecoin. The collapse of TerraUSD in 2022 led to the loss of billions of dollars from investors globally. Kwon, who is also the former CEO of Terraform Labs, acknowledged his role in misleading investors and artificially propping up the value of TerraUSD through deceptive means.
At a hearing in the Southern District of New York, Kwon admitted to charges of conspiracy to defraud and wire fraud. His plea came after several months of legal proceedings and extradition from Montenegro, where he had been arrested. In court, Kwon expressed regret for his actions and acknowledged the harm caused to investors, saying, “What I did was wrong.”
Collapse of TerraUSD and the Consequences
TerraUSD was an algorithmic stablecoin designed to maintain a stable value of $1, backed by the cryptocurrency Luna. However, in May 2021, the stablecoin began to lose its peg to the U.S. dollar, leading to a rapid decline in value.
Kwon and his team at Terraform Labs promoted TerraUSD as a secure investment, claiming the algorithm used in the system could restore its stability.
Instead, investigators claim Kwon arranged for a high-frequency trading firm to purchase millions of dollars of TerraUSD to artificially stabilize the price. These actions misled investors, both retail and institutional, into continuing to support Terraform’s projects. This led to a massive loss, including the devaluation of Luna and the eventual collapse of the entire system, causing an estimated $40 billion in losses.
Do Kwon Legal Proceedings and Sentence
Kwon faces up to 25 years in prison for his role in the fraud. However, prosecutors indicated that they would recommend a lesser sentence of no more than 12 years if he cooperates fully with the authorities. The sentencing is scheduled for December 11, 2025, where the court will determine the final sentence based on Kwon’s cooperation and his acceptance of responsibility for his actions.
In addition to the criminal charges, Kwon and Terraform Labs reached a civil settlement with the U.S. Securities and Exchange Commission (SEC) in 2024, agreeing to pay an $80 million fine and to be banned from conducting crypto transactions. This settlement was part of a broader legal effort to hold Kwon and Terraform accountable for their misleading practices that harmed investors.
Despite his guilty plea in the U.S., Kwon still faces charges in his home country of South Korea. South Korean authorities have been actively pursuing him, and extradition discussions continue. The guilty plea in the U.S. might influence how Kwon’s case is handled in other jurisdictions. Under his current agreement with U.S. prosecutors, they have indicated they would not oppose his potential transfer to South Korea once he has served at least half of his U.S. sentence.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
