Do Kwon to Change Not Guilty Plea in U.S. Fraud Case

Do Kwon, the founder of Terraform Labs, is expected to change his "not guilty" plea in a U.S. federal fraud case, according to a recent court filing by Judge Paul Engelmayer of the Southern District of New York [1]. The hearing is set for Tuesday, and the judge indicated that Kwon may enter a new plea, though it remains unclear whether he will plead guilty to all charges or if a plea deal is involved. Kwon previously pleaded not guilty to multiple counts, including securities fraud, market manipulation, money laundering, and wire fraud, related to the collapse of the Terra/Luna stablecoin ecosystem in 2022 [1].

The Terra ecosystem, once valued at over $18 billion, collapsed rapidly after the algorithmic stablecoin TerraUSD lost its peg and the Luna token plummeted in value. This event wiped out approximately $40 billion in investor assets and sent shockwaves across the cryptocurrency market [1]. Kwon’s legal journey has been complex, spanning over a year of extradition proceedings from Montenegro, where he was arrested in late 2024 for using falsified travel documents [1]. He was eventually extradited to the U.S. and has been held without bail since January 2025, with a tentative trial date set for January 2026 [1].

Before the criminal case, Kwon and Terraform Labs were already found civilly liable by the U.S. Securities and Exchange Commission (SEC) in a separate lawsuit. The court ordered them to pay $4.5 billion in penalties and disgorgement, one of the largest penalties in a cryptocurrency-related case [1]. Judge Engelmayer’s recent order instructed Kwon’s defense team to review any plea agreement or Pimentel letter with him prior to the hearing and emphasized the need for Kwon to prepare a narrative allocution that includes all elements of the offense to which he is pleading guilty [1].

The court filing also noted that the U.S. Attorney’s office in the Southern District of New York, led by interim U.S. Attorney Jay Clayton, has engaged in “productive discussions” with Kwon’s legal team for months [1]. The development comes just days after the same district court found Tornado Cash co-founder Roman Storm guilty of running an unlicensed money transmitting service, highlighting the U.S. government’s ongoing focus on cryptocurrency-related legal actions [1].

Kwon’s attorney has not commented publicly on the upcoming hearing or potential plea change. The legal outcome could significantly impact the broader cryptocurrency industry, as it reflects the U.S. legal system’s increasing scrutiny of algorithmic stablecoins and their creators [1].

Source: [1] Terra Founder Do Kwon Expected to Change Not Guilty Plea in US Fraud Case (https://blockonomi.com/terra-founder-do-kwon-expected-to-change-not-guilty-plea-in-us-fraud-case/)