Do Kwon Pleads Guilty to Fraud in $40 Billion Cryptocurrency Collapse
Published 12 August 2025
Highlights
- Do Kwon, former head of Terraform Labs, pleaded guilty to two counts of fraud related to the $40 billion cryptocurrency collapse.
- Kwon's plea deal limits his potential sentence to 12 years, though the judge could impose up to 25 years.
- He admitted to misleading investors about the stability of TerraUSD, a stablecoin linked to the Luna token.
- Kwon must forfeit up to $19.3 million and faces additional charges in South Korea.
- In 2024, Kwon agreed to an $80 million civil fine and a ban from crypto transactions in a settlement with the SEC.
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Rewritten Article
Headline: Do Kwon Pleads Guilty to Fraud in $40 Billion Cryptocurrency Collapse
Do Kwon, the former CEO of Terraform Labs, has pleaded guilty to two counts of fraud in connection with the collapse of the TerraUSD and Luna cryptocurrencies, which collectively wiped out $40 billion from the market. The plea was entered in a New York federal court, marking a significant development in the ongoing legal saga surrounding the South Korean entrepreneur.
The Collapse of TerraUSD and Luna
Terraform Labs, based in Singapore, was behind the creation of TerraUSD, a stablecoin designed to maintain a $1 value, and Luna, a more volatile cryptocurrency. In 2021, Kwon allegedly orchestrated a scheme to mislead investors about the stability of TerraUSD. Prosecutors claim he secretly arranged for a trading firm to buy millions of dollars worth of TerraUSD to artificially maintain its value, while publicly attributing the stability to a computer algorithm known as the Terra Protocol.
Legal Proceedings and Plea Deal
Initially facing a nine-count indictment, including securities and wire fraud, Kwon's plea deal with the Manhattan US attorney's office reduces his charges to two counts of conspiracy to defraud and wire fraud. As part of the agreement, prosecutors will recommend a sentence of no more than 12 years, although Judge Paul Engelmayer has the discretion to impose a sentence of up to 25 years. Kwon is scheduled for sentencing on December 11.
Financial Penalties and Future Implications
In addition to his guilty plea, Kwon has agreed to forfeit up to $19.3 million and several properties. He also faces a civil fine of $80 million and a ban from participating in cryptocurrency transactions, as part of a $4.55 billion settlement with the US Securities and Exchange Commission reached in 2024. Despite these penalties, Kwon still faces legal challenges in South Korea.
Apologies and Accountability
In court, Kwon expressed remorse for his actions, stating, "I made false and misleading statements about why [TerraUSD] regained its peg. What I did was wrong, and I want to apologize for my conduct." Todd Snyder, appointed to oversee Terraform Labs' liquidation, emphasized the importance of accountability in the digital asset sector, noting that efforts are underway to recover assets for claimants.
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Scenario Analysis
The outcome of Kwon's sentencing could set a precedent for future cases involving cryptocurrency fraud, particularly as regulators and law enforcement agencies increase scrutiny on digital assets. If Kwon receives a sentence closer to the maximum 25 years, it may signal a tougher stance on crypto-related crimes. Additionally, Kwon's legal battles in South Korea could further complicate his future, potentially leading to additional penalties or extradition requests. As the cryptocurrency market continues to evolve, this case underscores the critical need for transparency and regulation to protect investors and maintain market stability.
Do Kwon, the former CEO of Terraform Labs, has pleaded guilty to two counts of fraud in connection with the collapse of the TerraUSD and Luna cryptocurrencies, which collectively wiped out $40 billion from the market. The plea was entered in a New York federal court, marking a significant development in the ongoing legal saga surrounding the South Korean entrepreneur.
The Collapse of TerraUSD and Luna
Terraform Labs, based in Singapore, was behind the creation of TerraUSD, a stablecoin designed to maintain a $1 value, and Luna, a more volatile cryptocurrency. In 2021, Kwon allegedly orchestrated a scheme to mislead investors about the stability of TerraUSD. Prosecutors claim he secretly arranged for a trading firm to buy millions of dollars worth of TerraUSD to artificially maintain its value, while publicly attributing the stability to a computer algorithm known as the Terra Protocol.
Legal Proceedings and Plea Deal
Initially facing a nine-count indictment, including securities and wire fraud, Kwon's plea deal with the Manhattan US attorney's office reduces his charges to two counts of conspiracy to defraud and wire fraud. As part of the agreement, prosecutors will recommend a sentence of no more than 12 years, although Judge Paul Engelmayer has the discretion to impose a sentence of up to 25 years. Kwon is scheduled for sentencing on December 11.
Financial Penalties and Future Implications
In addition to his guilty plea, Kwon has agreed to forfeit up to $19.3 million and several properties. He also faces a civil fine of $80 million and a ban from participating in cryptocurrency transactions, as part of a $4.55 billion settlement with the US Securities and Exchange Commission reached in 2024. Despite these penalties, Kwon still faces legal challenges in South Korea.
Apologies and Accountability
In court, Kwon expressed remorse for his actions, stating, "I made false and misleading statements about why [TerraUSD] regained its peg. What I did was wrong, and I want to apologize for my conduct." Todd Snyder, appointed to oversee Terraform Labs' liquidation, emphasized the importance of accountability in the digital asset sector, noting that efforts are underway to recover assets for claimants.
What this might mean
The outcome of Kwon's sentencing could set a precedent for future cases involving cryptocurrency fraud, particularly as regulators and law enforcement agencies increase scrutiny on digital assets. If Kwon receives a sentence closer to the maximum 25 years, it may signal a tougher stance on crypto-related crimes. Additionally, Kwon's legal battles in South Korea could further complicate his future, potentially leading to additional penalties or extradition requests. As the cryptocurrency market continues to evolve, this case underscores the critical need for transparency and regulation to protect investors and maintain market stability.
