Kwon Do admits to guilt in $40 billion fraud case, seeking potential liberty in exchange
In a landmark case, Do Kwon, co-founder of Terraform Labs, has pleaded guilty to conspiracy to defraud and wire fraud related to the $40 billion collapse of TerraUSD (UST) and Luna cryptocurrencies. This guilty plea comes after Kwon's extradition to the U.S. from Montenegro in late 2023 following his arrest on a false passport.
TerraUSD, marketed as a stablecoin pegged to the dollar, was designed to avoid price volatility. However, it lost its peg, leading to a collapse that wiped out $40 billion of market value. Kwon was accused of conspiracy, securities and commodities fraud, and wire fraud for misleading investors about TerraUSD’s stability and obscuring artificial market support.
As part of his plea agreement, Kwon has agreed to forfeit his interest in Terraform Labs and its cryptocurrencies. He has also paid an $80 million fine and forfeited over $19 million of ill-gotten gains. Prosecutors will recommend a maximum of 12 years in prison, a significant reduction from the potential 25 years he could have faced.
The sentencing is scheduled for December 2025, a timing that could establish a benchmark for prosecuting fraud in the crypto industry. The case represents one of the largest fraud prosecutions in cryptocurrency history tied to a stablecoin collapse that shook global digital asset markets.
Kwon admitted in court that he made false and misleading statements about Terra's peg restoration. The question remains whether 12 or 25 years would be enough to balance the scales for the thousands of retail investors who trusted Terra's promises.
This plea deal is a fraction of the $4.55 billion settlement Kwon and Terraform reached with the SEC earlier this year. Kwon faces separate charges in South Korea, where he faces a lifetime crypto ban as part of the settlement.
Meanwhile, regulators globally are tightening crypto oversight, and the industry continues to evolve. For instance, Sonic recently launched testnet 2.1 adding Pectra compatibility. As the crypto landscape changes, it's clear that even influential figures in decentralized finance can face consequences for their actions.
[1] New York Times - Do Kwon pleads guilty to cryptocurrency fraud [2] Reuters - Do Kwon guilty in $40 billion cryptocurrency fraud case [3] Bloomberg - Do Kwon pleads guilty, faces up to 12 years in prison [4] CoinDesk - Do Kwon admits to misleading investors in TerraUSD collapse [5] Cointelegraph - Do Kwon guilty in $40 billion cryptocurrency fraud case
