Do Kwon Pleads Guilty to Fraud in $40B Terraform Collapse

Terraform Labs co-founder Do Kwon has pleaded guilty to two U.S. criminal charges tied to the $40 billion collapse of TerraUSD and Luna. The South Korean entrepreneur entered the plea in the Southern District of New York after earlier denying all charges. The agreement with prosecutors includes financial penalties of up to $19 million and a recommendation for a reduced prison term.

Plea Change and Court Proceedings

Do Kwon pleaded guilty to conspiracy to commit fraud and wire fraud at a hearing before Judge Paul Engelmayer. In the event of him pleading guilty, the prosecutors were willing to recommend a maximum of 12 years imprisonment. Had the plea not taken place, he could have been sentenced to a maximum of 135 years on the nine original charges.

The judge informed Do Kwon that he would be allowed to sentence him to more than the Department of Justice would recommend. Kwon will be sentenced on December 11 after being in the United States since January when he was extradited following his arrest in Montenegro. According to documentary evidence on file with the court, he waived trial on the two charges.

Details of the Do Kwon Charges

Prosecutors accused Kwon of misleading investors about the stability of TerraUSD in 2021. The stablecoin was marketed to maintain a $1 value but collapsed in May 2022. Kwon admitted making false statements about the token’s recovery process, including the role of a trading firm.

He acknowledged participating in a scheme to defraud purchasers of cryptocurrencies issued by Terraform Labs between 2018 and 2022. The plea agreement also requires forfeiture of properties and payment of restitution. “What I did was wrong and I want to apologize for my conduct,” Kwon told the court.

Background and Ongoing Legal Issues

After the crash of the Terra ecosystem, Kwon disappeared out of sight for several months. He was arrested by Montenegrin authorities in March 2023 on suspicion of travelling with forged documents. He was jailed four months, then extradited to the United States.

Kwon still faces legal action in South Korea on related charges. In a separate case, a U.S. jury previously found him and Terraform Labs liable for civil fraud in a lawsuit filed by the Securities and Exchange Commission. The international prisoner transfer possibility was included in his plea deal if he serves half of his sentence.