Do Kwon Pleads Guilty in TerraUSD-Luna Collapse Scam

Do Kwon, co-founder of Terraform Labs, has entered a guilty plea in a U.S. federal court for fraud related to the collapse of TerraUSD (UST) and Luna (LUNA) in 2022, which erased an estimated $40 billion in value [1]. The plea agreement includes admission to one count of conspiracy to commit commodities fraud, securities fraud, and wire fraud, and a second count of wire fraud [2]. The charges stem from Kwon’s alleged deception of investors by falsely claiming that an algorithm known as the Terra Protocol had stabilized UST, which was designed to maintain a $1 peg [2]. In reality, prosecutors allege Kwon coordinated with a high-frequency trading firm to artificially inflate the price of UST [2].

The plea significantly reduces the potential prison time Kwon could have faced. Previously, the nine-count indictment carried a maximum of 130 years in prison [2]. Under the agreement, he now faces up to 25 years, including 20 years for wire fraud and five for conspiracy [3]. Prosecutors from the U.S. Attorney’s Office for the Southern District of New York have indicated they will seek no more than 12 years if Kwon accepts full responsibility, which he did during the hearing by acknowledging, “What I did was wrong” [4]. His sentencing is scheduled for December 11, 2025 [2].

In a prior settlement with the U.S. Securities and Exchange Commission (SEC) in 2024, Kwon agreed to pay an $80 million civil fine as part of a $4.55 billion overall settlement, which also included a lifetime ban from crypto transactions [2]. He has been in U.S. custody since his extradition from Montenegro in late 2024 and faces additional legal proceedings in South Korea [2]. As part of the plea deal, U.S. prosecutors have agreed not to oppose a request to transfer Kwon to another country after he serves half of his U.S. sentence [2].

The TerraUSD and Luna collapse had a profound impact on the crypto market, triggering a broader loss of confidence in algorithmic stablecoins and leading to a reevaluation of risk in the sector. Kwon’s guilty plea represents a major legal development in the increasing scrutiny of crypto projects and their operators [5]. His case adds to a growing list of regulatory actions targeting crypto entrepreneurs accused of misleading investors and violating securities laws [5]. The ongoing legal processes may influence future regulatory frameworks, promoting improved oversight and investor protections in the digital asset space [5].