August 13, 2025
5 min read
Peter Mwenda
Do Kwon Pleads Guilty to Fraud in $40B TerraUSD Collapse
Terraform Labs co-founder Do Kwon has pleaded guilty to two U.S. criminal charges related to the $40 billion collapse of TerraUSD and Luna. The South Korean entrepreneur entered the plea in the Southern District of New York after previously denying all charges. The plea agreement includes financial penalties of up to $19 million and a recommendation for a reduced prison term.In Brief
- Do Kwon admits to fraud in the $40 billion TerraUSD and Luna collapse from 2022.
- Plea deal includes $19 million in penalties and a sentence recommendation of 12 years.
- Sentencing is scheduled for December 11, 2025, while related charges remain pending in South Korea.
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Plea Change and Court Proceedings
Do Kwon pleaded guilty to conspiracy to commit fraud and wire fraud during a hearing before Judge Paul Engelmayer. Prosecutors agreed to recommend a maximum sentence of 12 years imprisonment in exchange for the plea. Without this plea, Kwon faced a potential sentence of up to 135 years on nine original charges. The judge informed Kwon that he could impose a sentence exceeding the Department of Justice's recommendation. Kwon has been in the United States since January 2025, after being extradited following his arrest in Montenegro. Documentary evidence filed with the court shows he waived his right to trial on the two charges.Details of the Charges
Prosecutors accused Kwon of misleading investors about TerraUSD's stability in 2021. The stablecoin was marketed to maintain a $1 value but collapsed in May 2022. Kwon admitted to making false statements about the token’s recovery process, including the involvement 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. Kwon stated in court, "What I did was wrong and I want to apologize for my conduct."Background and Ongoing Legal Issues
Following the Terra ecosystem crash, Kwon disappeared for several months. He was arrested by Montenegrin authorities in March 2023 on suspicion of traveling with forged documents. After four months in jail, he was 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 (SEC). The plea deal includes a possibility of international prisoner transfer if he serves half of his sentence.Frequently Asked Questions (FAQ)
TerraUSD Collapse and Do Kwon's Legal Proceedings
Q: What was Do Kwon found guilty of? A: Do Kwon pleaded guilty to two U.S. criminal charges: conspiracy to commit fraud and wire fraud, in relation to the collapse of TerraUSD and Luna. Q: What was the recommended sentence for Do Kwon? A: Prosecutors recommended a maximum sentence of 12 years imprisonment, a significant reduction from the potential 135 years he could have faced on the original nine charges. Q: When is Do Kwon's sentencing scheduled? A: His sentencing is scheduled for December 11, 2025. Q: Where was Do Kwon arrested and extradited from? A: Do Kwon was arrested in Montenegro and later extradited to the United States. Q: Does Do Kwon face legal issues outside the U.S.? A: Yes, Do Kwon still faces legal action in South Korea on related charges stemming from the Terra collapse. Q: What was the approximate value of the TerraUSD and Luna collapse? A: The collapse was valued at approximately $40 billion. Q: Did Do Kwon admit to his actions? A: Yes, Do Kwon stated in court, "What I did was wrong and I want to apologize for my conduct." Q: What are the financial penalties Do Kwon agreed to? A: The plea agreement includes financial penalties of up to $19 million. Q: What was the key misleading statement attributed to Do Kwon? A: Prosecutors accused Kwon of misleading investors about TerraUSD's stability, particularly its claim to maintain a $1 value. He also admitted to making false statements about the token's recovery process.Crypto Market AI's Take
The conviction of Do Kwon marks a significant moment in the cryptocurrency industry, highlighting the increasing regulatory scrutiny and the legal ramifications of project failures. For projects and investors, this serves as a stark reminder of the importance of transparency, robust risk management, and adherence to regulatory frameworks. At AI Crypto Market, we are committed to providing a secure and compliant platform that leverages AI for insightful market analysis and informed trading decisions. Our focus remains on empowering users with advanced tools and educational resources to navigate the complexities of the crypto market responsibly. You can explore our AI Crypto Market Platform for insights into how AI is shaping the future of finance, and learn more about navigating the market with our Advanced Trading guides.More to Read:
Originally published at Cointribune on Wed, 13 Aug 2025 11:05:00 GMT