Crypto Mogul Do Kwon Pleads Guilty to Fraud Charges
South Korean cryptocurrency mogul Do Kwon pleaded guilty on Tuesday to two fraud charges arising from the $40 billion collapse of a cryptocurrency ecosystem that had promised investors their money was safe.
Kwon, 33, who has been dubbed by some as “the cryptocurrency king,” entered the plea in Manhattan federal court.
According to a plea agreement signed by Kwon and prosecutors, the government agreed not to seek a prison term exceeding 12 years, provided Kwon complies with the terms of the deal. This is notably less than the approximately 25 years recommended by federal sentencing guidelines. Sentencing is scheduled for December 11.
Authorities reported that investors worldwide suffered losses due to the crash of Terraform Labs, a Singapore-based crypto firm co-founded by Kwon in 2018.
The collapse occurred in May 2022 after Terraform Labs claimed that TerraUSD was a reliable “stablecoin.” TerraUSD was designed as a stablecoin, a cryptocurrency pegged to stable assets such as the U.S. dollar to prevent drastic price fluctuations. However, the stablecoin plunged far below its $1 peg, erasing around $40 billion in market value for holders of TerraUSD and its floating sister currency, Luna.
Kwon was extradited to the United States on December 31 from Montenegro following his arrest on March 23, 2023, when he was found traveling on a false passport in Europe.
As part of his plea, Kwon admitted to one count of conspiring to commit commodities fraud, securities fraud, and wire fraud, and a second count of wire fraud. He also agreed to forfeit over $19 million, which authorities said represented ill-gotten proceeds. Additionally, he will lose his interest in Terraform Labs and its cryptocurrencies.
Kwon’s lawyer, Sean Hecker, stated that the plea signified Kwon’s acceptance of responsibility for making false and misleading statements to investors. Hecker said, “My client takes responsibility for misleading the Terra community.”
In a statement, U.S. Attorney Jay Clayton condemned Kwon’s actions, saying he “used the technological promise and investment euphoria around cryptocurrency to commit one of the largest frauds in history.” Clayton emphasized that investors worldwide suffered billions of dollars in losses.
Source: The Hill
Frequently Asked Questions (FAQ)
Q: What led to the collapse of the TerraUSD and Luna ecosystem?
A: The collapse was triggered when TerraUSD, a stablecoin designed to be pegged to the U.S. dollar, de-pegged and plunged significantly below its $1 target. This instability led to a massive loss of value for its sister currency, Luna, resulting in approximately $40 billion in market value erasure.
Q: What charges did Do Kwon plead guilty to?
A: Do Kwon pleaded guilty to two fraud charges: one count of conspiring to commit commodities fraud, securities fraud, and wire fraud, and a second count of wire fraud.
Q: What is the potential sentence Do Kwon faces?
A: As part of his plea agreement, prosecutors have agreed not to seek a prison term exceeding 12 years, which is significantly less than the federal sentencing guidelines' recommendation of approximately 25 years.
Q: What financial penalties did Do Kwon agree to?
A: Do Kwon agreed to forfeit over $19 million in ill-gotten proceeds and will lose his interest in Terraform Labs and its associated cryptocurrencies.
Q: Where was Do Kwon arrested and extradited from?
A: Do Kwon was arrested in Montenegro on March 23, 2023, while traveling on a false passport, and was subsequently extradited to the United States.
Crypto Market AI's Take
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