Do Kwon Pleads Guilty to TerraUSD Luna Collapse Fraud

Do Kwon, co-founder of Terraform Labs, has pleaded guilty to two federal charges related to the 2022 collapse of the TerraUSD and Luna tokens, a crypto event that erased an estimated $40 billion in investor value. The plea was entered in the U.S. District Court for the Southern District of New York, marking a significant shift from Kwon’s earlier January 2025 not-guilty plea following his extradition from Montenegro [3]. The charges relate to conspiracy to defraud and wire fraud, as outlined in a nine-count indictment that initially included securities fraud, commodities fraud, and money laundering conspiracy [1].

Kwon appeared before U.S. District Judge Paul Engelmayer, where he admitted to misleading investors about the stability of TerraUSD, an algorithmic stablecoin designed to maintain a $1 peg. The collapse occurred when confidence in the model eroded, triggering a cascading de-peg that wiped out billions in assets. The plea agreement includes a $19 million financial penalty, part of which may be allocated to compensate victims of the collapse. Kwon faces a maximum sentence of 25 years, but prosecutors have agreed to recommend no more than 12 years if he continues to accept responsibility [1].

Kwon’s legal troubles began in March 2023 when U.S. prosecutors filed criminal charges following the Terra ecosystem’s collapse. After evading authorities for months, he was arrested in Montenegro for using falsified travel documents and spent four months in prison before extradition [3]. His sentencing is scheduled for December 11, with Judge Engelmayer indicating the sentence will be determined based on what he considers a “just sentence” [2].

The case follows a broader trend of high-profile legal actions in the crypto space, including the 2024 sentencing of FTX founder Sam Bankman-Fried and the guilty verdict against Tornado Cash co-founder Roman Storm. These developments highlight the intensifying regulatory scrutiny of crypto projects and the increasing legal accountability for project leaders. Kwon’s guilty plea signals the near-resolution of the U.S. legal case, though potential actions remain pending in South Korea. The case also raises critical questions about the need for stronger oversight in the digital asset industry [5].

Sources:

[1] Reuters, [https://www.reuters.com/legal/government/do-kwon-plead-guilty-us-conspiracy-fraud-charges-40-billion-crypto-collapse-2025-08-12/](https://www.reuters.com/legal/government/do-kwon-plead-guilty-us-conspiracy-fraud-charges-40-billion-crypto-collapse-2025-08-12/)

[2] Cointelegraph, [https://cointelegraph.com/news/do-kwon-guilty-fraud-terraform-labs](https://cointelegraph.com/news/do-kwon-guilty-fraud-terraform-labs)

[3] Investing.com, [https://www.investing.com/news/cryptocurrency-news/terraforms-do-kwon-to-plead-guilty-to-two-counts-of-conspiracy-to-defraud-wire-fraud-over-40-billion-crypto-collapse--us-judge-says-in-court-hearing-432SI-4185579](https://www.investing.com/news/cryptocurrency-news/terraforms-do-kwon-to-plead-guilty-to-two-counts-of-conspiracy-to-defraud-wire-fraud-over-40-billion-crypto-collapse--us-judge-says-in-court-hearing-432SI-4185579)

[4] Bloomberg.com, [https://www.bloomberg.com/news/articles/2025-08-11/do-kwon-may-plead-guilty-in-us-case-over-terraform-collapse](https://www.bloomberg.com/news/articles/2025-08-11/do-kwon-may-plead-guilty-in-us-case-over-terraform-collapse)

[5] CoinCentral, [https://coincentral.com/do-kwon-expected-to-change-not-guilty-plea-in-terra-fraud-case-tuesday/](https://coincentral.com/do-kwon-expected-to-change-not-guilty-plea-in-terra-fraud-case-tuesday/)