Do Kwon Pleads Guilty in $40 Billion Crypto Collapse, Faces Up to 25 Years

New York – Do Kwon, the South Korean cryptocurrency entrepreneur and co-founder of Terraform Labs, pleaded guilty on Tuesday to charges of conspiracy to defraud and wire fraud in a U.S. court. The plea stems from the dramatic $40 billion collapse of his TerraUSD and Luna cryptocurrencies in 2022, an event that sent shockwaves through the global crypto market. Kwon, 33, now faces a maximum sentence of 25 years in prison, with sentencing scheduled for December 11.

Kwon admitted to misleading investors about the stability of TerraUSD (UST), a stablecoin designed to maintain a $1 peg. Prosecutors revealed that when UST depegged in May 2021, Kwon falsely claimed a computer algorithm restored its value. In reality, he secretly arranged for a high-frequency trading firm to purchase large amounts of UST to artificially prop up its price, a fact he concealed from the public.

His guilty plea in a Manhattan courtroom marks a significant shift from his initial not-guilty plea to a nine-count indictment that included securities fraud, commodities fraud, and money laundering conspiracy. Under the plea agreement, prosecutors will recommend a prison term of no more than 12 years, provided Kwon accepts responsibility for his actions. Kwon has also agreed to forfeit over $19 million in proceeds from his schemes.

Kwon’s legal troubles escalated after he was arrested in Montenegro in March 2023 while traveling on a false passport, following months on the run. He was subsequently extradited to the United States in December 2024. This criminal case follows a separate civil fraud settlement in 2024 with the U.S. Securities and Exchange Commission (SEC), where Kwon and Terraform Labs agreed to pay $4.55 billion and Kwon was personally banned from crypto transactions.

The collapse of TerraUSD and Luna wiped out billions in investor funds and triggered a broader contagion in the cryptocurrency market, leading to the downfall of several other major crypto firms. Kwon's admission of guilt underscores the ongoing efforts by U.S. authorities to hold individuals accountable for fraudulent activities within the volatile digital asset industry. He also faces separate criminal charges in South Korea.