Do Kwon Pleads Guilty to TerraUSD and Luna Fraud in Manhattan Court

Do Kwon, the co-founder of Terraform Labs, pleaded guilty in Manhattan federal court on August 9, 2025, to two counts of fraud related to the collapse of TerraUSD and its associated token Luna, which together lost $40 billion in value. The plea followed a January 2025 not-guilty plea, after Kwon was extradited from Montenegro. Under the agreement, he faces up to 25 years in prison, although prosecutors will seek no more than 12 years if Kwon demonstrates responsibility [1].

Kwon admitted to participating in a scheme to mislead investors about TerraUSD, a stablecoin marketed as being pegged to the U.S. dollar but which failed to maintain its value during the 2022 collapse. In court, Kwon acknowledged his role in the fraud, apologizing for his conduct and agreeing to forfeit over $19 million, as part of the plea deal [2]. Dressed in a yellow jumpsuit and in restraints, Kwon appeared before U.S. District Judge Paul Engelmayer, who noted that Kwon, as a non-U.S. citizen, would likely face deportation after serving any prison sentence.

The case has become a focal point for regulators and the broader crypto industry, as it highlights the risks of opaque and unregulated stablecoin structures. TerraUSD was once among the largest algorithmic stablecoins, but its failure triggered the so-called “crypto winter” of 2022, a period marked by widespread market declines and the collapse of other major projects, including FTX [3].

Kwon’s guilty plea represents a significant development in the ongoing legal scrutiny of crypto projects. It follows recent convictions of other industry figures, including Roman Storm of Tornado Cash and Keonne Rodriguez and William Lonergan Hill of Samourai Wallet, both of whom pleaded guilty to operating illicit money laundering services [4]. These cases reflect a broader trend of increased accountability and regulatory enforcement in the digital asset space.

The sentencing hearing is scheduled for December 2025, and the outcome could shape future regulatory approaches to stablecoins and algorithmic mechanisms. The TerraUSD and Luna collapse has already prompted several legal actions, including a $4.5 billion civil settlement between Terraform Labs and the U.S. Securities and Exchange Commission [5].

Kwon’s plea marks the end of a legal journey that took him from South Korea to Montenegro and finally to New York, where he has faced intense legal pressure and public scrutiny. The case underscores the growing emphasis on transparency and investor protection in the crypto market, particularly in the wake of high-profile failures.