Terraform Founder Do Kwon to Plead Guilty in $40B UST Fraud Case

Terraform co-founder Do Kwon has agreed to plead guilty to two counts of fraud in a U.S. criminal case tied to the collapse of the Terra USD (UST) stablecoin in 2022, according to multiple reports. The plea comes after a lengthy legal battle and marks a major turning point in what has been described as one of the largest fraud cases in cryptocurrency history [1]. Kwon, 33, is expected to forgo his right to a trial and could face up to 25 years in prison [2]. A U.S. District Court judge in New York reportedly indicated that Kwon may change his plea, setting the stage for a formal hearing.

Kwon was initially charged in March 2023 with nine counts, including securities fraud, wire fraud, commodities fraud, and conspiracy to commit market manipulation and money laundering [3]. These charges were linked to the collapse of UST, an algorithmic stablecoin that was designed to maintain its value through algorithmic mechanisms and its relationship with the Luna (LUNA) token. The system’s failure in May 2022 triggered a cascading financial collapse that wiped out more than $40 billion in investor assets [4].

Kwon, who was arrested in March 2023 in Montenegro and extradited to the U.S. in December 2024, had previously entered a not guilty plea in January 2025. However, the recent developments suggest a strategic shift in his legal approach [5]. His decision to plead guilty could expedite the judicial process and avoid a protracted criminal trial.

The guilty plea follows a separate civil conviction in 2024, in which a jury found Kwon and Terraform Labs liable for misleading investors about the financial stability of UST. That case, brought by the U.S. Securities and Exchange Commission, centered on allegations of securities law violations and fraudulent conduct in relation to the sale of Terraform securities [6]. The civil ruling is now being used as the foundation for the criminal charges currently being processed in federal court.

Kwon’s case has drawn significant attention from investors, regulators, and the broader financial community. The collapse of Terra and Luna not only caused massive financial losses but also triggered a broader sell-off in the crypto market, raising concerns about the risks of algorithmic stablecoins and the need for stronger regulatory oversight. The outcome of Kwon’s plea could serve as a precedent for future legal actions in the crypto space and may reinforce calls for more stringent regulatory frameworks.

Kwon’s extradition and the subsequent legal proceedings also highlight the growing international cooperation in addressing cross-border financial crimes, particularly in the decentralized finance (DeFi) sector. The case underscores the challenges of enforcing accountability in a rapidly evolving and highly technical industry.

As legal proceedings move forward, the resolution of Kwon’s case is expected to influence investor sentiment and the broader perception of risk in the crypto market. While the native tokens of the Terra ecosystem have seen limited trading activity post-collapse, the legal developments may have long-term implications for market confidence and regulatory clarity.

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Source:

[1] title1: Terra's Do Kwon to Change 'Not Guilty' Plea in US Fraud Case

url1: https://www.coindesk.com/policy/2025/08/11/terra-s-do-kwon-to-change-not-guilty-plea-in-us-fraud-case

[2] title2: Do Kwon expected to plead guilty in $40B UST collapse case

url2: https://cryptoslate.com/terraform-labs-co-founder-do-kwon-set-to-plead-guilty-on-august-12-in-40-billion-fraud-case/

[3] title3: Do Kwon Set for Shock Guilty Plea in $40 Billion Fraud Case

url3: https://beincrypto.com/terraform-labs-founder-do-kwon-plead-guilty/

[4] title4: Do Kwon's Last Stand: The Endgame of Crypto's Most Expensive Cautionary Tale

url4: https://www.xt.com/en/blog/post/do-kwons-last-stand-the-endgame-of-cryptos-most-expensive-cautionary-tale

[5] title5: Terraform co-founder Do Kwon pleads guilty to two fraud charges in years long US case: reports

url5: https://www.theblock.co/post/366573/terraform-co-founder-do-kwon-pleads-guilty-to-two-fraud-charges-in-years-long-us-case-reports?utm_source=rss&utm_medium=rss

[6] title6: Terraform Labs co-founder Do Kwon set to plead guilty on ...