Do Kwon Pleads Guilty in U.S. Fraud Case Over Terra Collapse

Do Kwon, co-founder of Terraform Labs, entered a guilty plea on August 12, 2025, in U.S. federal court in New York, signaling a pivotal development in his legal case related to the collapse of the Terra stablecoin ecosystem. The plea, announced by District Judge Paul Engelmayer of the Southern District of New York, came after months of legal proceedings and marked a shift from Kwon’s initial not guilty stance [1]. As part of the plea agreement, Kwon could face up to 12 years in prison and a $19 million financial penalty. The court hearing was scheduled to address the potential plea change, though it remained unclear whether Kwon would admit to all charges or if a specific deal had been struck [1].

The guilty plea stems from the U.S. Department of Justice’s case against Kwon, which includes charges of wire fraud and conspiracy tied to the collapse of TerraUSD (UST) and Luna (LUNA). The algorithmic stablecoin system, once valued at over $18 billion, lost its dollar peg in May 2022, leading to one of the most severe financial crises in the crypto market. The collapse reportedly caused over $40 billion in investor losses [1].

Kwon’s legal challenges began in late 2024 when he was extradited to the U.S. from Montenegro after being detained for attempting to travel on a forged passport. A trial had initially been set for January 2026, but the plea change could alter the legal timeline. The court emphasized that Kwon’s defense team must review any plea agreement or Pimentel letter with him before the formal submission [1].

The legal developments follow a civil ruling by the U.S. Securities and Exchange Commission (SEC), which ordered Kwon and Terraform Labs to pay $4.5 billion in penalties and disgorgement in a separate fraud case [1]. The outcome of the sentencing phase, including the exact prison term and financial obligations, will depend on the court’s final processing of the plea and associated agreements. As of the hearing, Kwon’s legal representatives have not provided further comments [1].

Kwon’s guilty plea could serve as a significant precedent in the cryptocurrency industry, especially with ongoing legal actions against other high-profile figures in the sector. The case reflects heightened regulatory scrutiny of crypto projects and the potential legal consequences for fraudulent or deceptive practices. As the court moves forward with sentencing, the implications for the broader market, including investor confidence and regulatory responses, remain under close observation [1].

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[1] Terra's Do Kwon to Change 'Not Guilty' Plea in US Fraud ... (https://www.coinglass.com/ru/news/531381)