Do Kwon to Plead Guilty in UST-Luna Collapse Case

Do Kwon, co-founder of Terraform Labs and central figure in the 2022 collapse of the TerraUSD (UST) stablecoin and Luna (LUNA) cryptocurrency, is expected to plead guilty in a U.S. fraud case. The hearing is scheduled for Tuesday in the Southern District of New York. Kwon had previously entered a not guilty plea but is now considering admitting guilt, as indicated by Judge Paul A. Engelmayer, who directed the parties to prepare for a narrative allocution [1].

Kwon faces nine felony counts, including securities fraud, wire fraud, commodities fraud, and conspiracy to launder money. The charges are tied to the collapse of the Terra ecosystem, which caused an estimated $40 billion in losses for investors. The indictment alleges that Kwon engaged in deceptive practices, misleading investors and manipulating the market to maintain the illusion of UST's peg to the U.S. dollar [3].

If Kwon proceeds with the guilty plea, he could face substantial prison time. The maximum sentences for the charges range from five to seven years per count, depending on the specific offense. A guilty plea might also influence the length of any eventual sentence, potentially reducing the risk of a lengthy incarceration. However, the precise terms of any agreement have not been made public, and prosecutors have not confirmed any deal [8].

This development follows the settlement of a civil case between Kwon, Terraform Labs, and the U.S. Securities and Exchange Commission (SEC), which resulted in a $4.5 billion payout to investors. The guilty plea would mark a significant escalation in the legal consequences for Kwon and could signal a broader shift in the legal strategy of his defense team [9].

The potential plea may also impact the Terra blockchain ecosystem. While the court document does not specify how token valuations might be affected, the case has already cast a shadow over the Terra project and its related tokens. Investor sentiment remains fragile, and the outcome could influence market dynamics, particularly if exchange activity reflects the legal developments [5].

The proceedings continue to highlight the intensifying regulatory scrutiny within the cryptocurrency sector. As courts and regulators increasingly hold individuals accountable for market manipulation and deceptive practices, the case against Kwon could set a precedent for future enforcement actions. This development may reshape the regulatory landscape and investor perceptions in the blockchain industry [7].

Kwon’s legal team and the U.S. Attorney’s office have both declined to comment on the matter, leaving many details about the plea deal and its implications undisclosed. The silence has heightened uncertainty, especially regarding restitution requirements and any potential concessions from Kwon as part of a negotiated resolution [1].

The case underscores the growing legal risks associated with high-profile crypto projects. As the Terra collapse remains one of the largest financial failures in the history of digital assets, the U.S. legal system’s handling of Kwon’s case could have lasting implications for the industry’s regulatory and compliance frameworks [3].

Source:

[1] https://cryptonews.com.au/news/do-kwon-may-change-plea-in-us-fraud-case-judge-schedules-tuesday-hearing-130369/

[3] https://www.coindesk.com/policy/2025/08/11/terra-s-do-kwon-to-change-not-guilty-plea-in-us-fraud-case

[5] https://koreajoongangdaily.joins.com/news/2025-08-12/business/economy/Crypto-boss-Do-Kwon-expected-to-plead-guilty-in-US-fraud-case/2374041

[7] https://cointelegraph.com/news/terraform-do-kwon-change-plea-hearing

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

[9] https://sg.finance.yahoo.com/news/terras-kwon-change-not-guilty-202725107.html