Do Kwon to Plead Guilty in 2022 TerraUSD $40 Billion Collapse Case

Do Kwon, co-founder of Terraform Labs, is expected to plead guilty on August 12, 2025, in a U.S. federal court in New York, in connection with the $40 billion collapse of the TerraUSD (UST) stablecoin in 2022. The plea hearing, set before U.S. District Judge Paul Engelmayer, marks a significant shift from Kwon’s earlier not guilty plea in January 2024. If he admits guilt, he will be required to provide a detailed account of his alleged misconduct, known as a narrative allocution, outlining how his actions violated U.S. law [1].

Kwon faces a nine-count indictment that includes charges of conspiracy to defraud, commodities and securities fraud, market manipulation, wire fraud, and conspiracy to commit money laundering. The collapse of UST and its sister token LUNA in May 2022 led to the near-total loss of value for both coins, wiping out billions in investor assets and triggering a broader crisis in the crypto market. Several firms that relied on UST collapsed, including FTX, a major exchange [1].

Following the collapse, Kwon fled to Montenegro but was arrested in March 2023 while attempting to leave with a forged passport. The country held him in custody for over a year while U.S. and South Korean authorities vied for jurisdiction. In 2024, Montenegro extradited Kwon to the United States. The plea hearing could expedite his sentencing in the U.S., though it remains unclear whether he will also face trial in South Korea [1].

In April 2025, a U.S. jury found Kwon and Terraform Labs liable in a civil case brought by the U.S. Securities and Exchange Commission. The verdict concluded that they had misled investors about the stability of UST and the functionality of its blockchain technology. As part of the settlement, Kwon agreed to pay $4.47 billion and liquidate company assets to compensate victims and creditors [1].

A guilty plea would represent one of the most prominent admissions in the history of crypto-related legal cases. It could also influence the global regulatory landscape for algorithmic stablecoins, as authorities increasingly scrutinize the risks posed by complex and opaque financial models. The TerraUSD collapse is widely regarded as a turning point in the crypto industry, demonstrating the potential for systemic risk and the importance of regulatory oversight [5].

Kwon’s case has also highlighted the growing challenge of prosecuting cross-border crypto crimes. The jurisdictional dispute between the U.S. and South Korea underscored the difficulties of enforcing legal actions in an industry that operates without clear geographic boundaries [4].

Sources:

[1] https://www.ccn.com/news/crypto/do-kwon-set-to-change-plea-in-40b-terrausd-collapse-case/

[2] https://www.mexc.com/news/luna-and-lunc-on-the-edge-as-do-kwon-eyes-guilty-plea-in-40b-terraform-case/64793

[3] https://www.mexc.com/news/terraform-co-founder-do-kwon-to-plead-guilty-in-40b-ust-fiasco/64816

[4] https://www.ainvest.com/news/kwon-plead-guilty-terraform-fraud-case-2508/

[5] https://cryptoslate.com/terraform-labs-co-founder-do-kwon-set-to-plead-guilty-on-august-12-in-40-billion-fraud-case/