Do Kwon Pleads Guilty in $40B Crypto Fraud, Faces Sentencing

Do Kwon Admits Role in TerraUSD Collapse and Faces Up to 25 Years

NEW YORK, Aug 12, Do Kwon, the co-founder of Terraform Labs and creator of cryptocurrencies TerraUSD and Luna, has pleaded guilty to two federal charges in the United States. The 33-year-old admitted in court to conspiracy to defraud and wire fraud in a case tied to one of the largest collapses in crypto history.

Source: Wu Blockchain

The plea was entered before U.S. District Judge Paul Engelmayer in New York. This marks a major turning point in the long-running legal battle that began after TerraUSD and Luna lost nearly $40 billion in market value in 2022.

How Do Kwon Crypto Empire Fall Apart

Do Kwon launched TerraUSD as a so-called stablecoin meant to keep a fixed $1 value using an algorithm. However, in May 2021, TerraUSD briefly lost its peg. At the time, he told investors that the coin’s value had been restored by its Terra Protocol algorithm.

Prosecutors later revealed that this was not true. Instead, he arranged for a high-frequency trading firm to secretly buy millions of dollars’ worth of TerraUSD to push its value back up. 

This false claim, they say, encouraged both retail and institutional investors to buy more Terraform products. It also boosted the price of Luna to around $50 billion by early 2022, right before the crash.

Plea Deal and Possible Sentence

Under the plea agreement with the Manhattan U.S. Attorney’s Office, prosecutors will recommend a prison sentence of no more than 12 years if Do Kwon fully accepts the accountability. However, the maximum sentence for his charges is 25 years.

In court, Do Kwon admitted to making “false and misleading statements” about the recovery of TerraUSD’s peg and apologized for his actions. 

He also agreed in 2024 to pay an $80 million civil fine. Also accepted a lifetime ban on crypto transactions as part of a $4.55 billion settlement with the U.S. SEC.

He  has been in custody since being extradited from Montenegro late last year, where he was arrested while trying to board a private jet to Dubai with a forged passport. He also faces criminal charges in South Korea.

Global Legal Battles

The case against Do Kwon has drawn attention globally, underscoring the risks of unregulated crypto projects. 

After his arrest in Montenegro in March 2023, both the United States and South Korea sought his extradition. Eventually, he was sent to the U.S. to face fraud charges.

Prosecutors in the U.S. said they will not oppose his request to serve part of his sentence abroad if he completes half of it in the United States. 

Conclusion

The guilty plea of Do Kwon is a big and prominent case of criminal repercussions against a founder of a crypto project. 

His sentencing is scheduled for December 11, and the conclusion of this case can become a precedent to subsequent actions of international authorities in relation to massive fraud schemes with digital assets.