Cryptocurrency entrepreneur Do Kwon admits to fraud in American court hearing
Do Kwon, the co-founder of Singapore-based Terraform Labs, has formally acknowledged guilt in a major U.S. fraud case stemming from the Terra stablecoin collapse. Kwon pleaded guilty to two charges: conspiracy to commit fraud and wire fraud.
Kwon's guilty plea was made under an agreement with the Manhattan U.S. Attorney's office, which brought the charges. The prosecutor, Kimberly Ravener, stated that the government had agreed to advocate for a prison term of no more than 12 years, provided Kwon accepts responsibility for his crimes.
Kwon faces up to 25 years in prison when U.S. District Judge Paul Engelmayer sentences him on Dec. 11. This sentencing is scheduled for later this year.
Key Details
The Terra blockchain had two main assets: TerraUSD stablecoin (UST) and the LUNA governance token. The collapse of these assets triggered a large crypto market crash in May 2022.
Initially, Kwon was indicted on nine counts including securities fraud and money laundering conspiracy related to Terra's $40 billion collapse in 2022. He was arrested in Europe in 2023 while traveling on a fake passport.
Kwon's guilty plea marked a major legal milestone, with prosecutors emphasizing the case's significance for digital asset market integrity. Prior to pleading guilty on August 12, 2025, Kwon had maintained a not guilty plea; a court hearing on August 13 signaled his change of plea.
The Alleged Fraud
Prosecutors allege that when TerraUSD slipped below its $1 peg in May 2021, Kwon claimed a computer algorithm known as "Terra Protocol" had restored the coin's value. However, it was later revealed that Kwon had arranged for a high-frequency trading firm to secretly buy millions of dollars of the token to artificially prop up its price.
False claims and others, as alleged by prosecutors, drove retail and institutional investors to purchase Terraform products, boosting the value of Luna to $50 billion by spring 2022.
Previous Settlement and Future Implications
Kwon had previously faced charges of securities fraud, wire fraud, commodities fraud, and money laundering conspiracy, but he had previously pleaded not guilty to a nine-count indictment charging him with these crimes.
In 2024, Kwon agreed to pay $80 million as a civil fine and be banned from crypto transactions as part of a $4.55 billion settlement he and Terraform reached with the U.S. Securities and Exchange Commission (SEC).
As part of the deal, prosecutors will not oppose Kwon's potential application to be transferred abroad after serving half his U.S. sentence, according to the prosecutor, Kimberly Ravener.
Kwon's case is one of several cryptocurrency-related fraud cases that have emerged following a slump in digital token prices in 2022, which prompted the collapse of a number of companies.
Kwon has been detained since his extradition from Montenegro late last year. He developed the TerraUSD and Luna currencies. In court, Kwon apologized for his conduct and admitted to making false and misleading statements about the restoration of TerraUSD's peg by failing to disclose a trading firm's role.
[1] The Washington Post [2] Bloomberg [3] Reuters [4] CoinDesk
- The guilty plea by Do Kwon, co-founder of Singapore-based Terraform Labs, in a U.S. fraud case connected to the Terra stablecoin collapse, signifies a significant development for the digital asset market's general-news and finance sectors.
- The case against Kwon, who is charged with conspiracy to commit fraud and wire fraud, could have far-reaching implications for the business world, as the alleged fraud involving TerraUSD and LUNA governance token may serve as a example of potential risks and penalties associated with crime-and-justice activities in the crypto market.
