Do Kwon, the South Korean entrepreneur behind Terraform Labs and the failed cryptocurrencies TerraUSD and Luna, has pleaded guilty to U.S. charges of conspiracy to defraud and wire fraud. This admission comes after the collapse of these digital currencies in 2022, which resulted in an estimated $40 billion loss for investors.
Initially, Kwon had pleaded not guilty to a nine-count indictment that included securities fraud, commodities fraud, and money laundering conspiracy. However, in a recent court appearance, he accepted a plea deal, reducing his potential prison time to a maximum of 12 years, though he faced up to 25 years. Prosecutors revealed that Kwon misled investors by falsely claiming that TerraUSD's value was stabilized by algorithmic mechanisms, while secretly enlisting a high-frequency trading firm to prop up the coin's value.
At the hearing, Kwon admitted to making misleading statements and apologized for his actions. In 2024, he settled with the SEC, agreeing to pay an $80 million civil fine and withdraw from crypto dealings. Detained since his extradition from Montenegro, Kwon also faces charges in South Korea. U.S. prosecutors have indicated they will not oppose a request for his transfer abroad after he serves half of his American sentence.
The collapse of TerraUSD and Luna had a significant impact on the cryptocurrency market, contributing to the broader "crypto winter" and preceding major industry failures like the FTX exchange. Kwon's sentencing is scheduled for December, with prosecutors recommending up to 12 years in prison, although the theoretical maximum is 25.
This case follows high-profile convictions of other crypto executives, including those behind Tornado Cash and Samourai Wallet. Terraform Labs had previously settled a civil fraud case for $4.5 billion with the SEC. Kwon's legal troubles have also made him a controversial figure in South Korea, which initially sought his extradition.
