Do Kwon, the South Korean entrepreneur behind Terraform Labs and the failed cryptocurrencies TerraUSD and Luna, has pleaded guilty to U.S. federal fraud charges in connection with the $40 billion collapse of his crypto empire in 2022. In a Manhattan federal court, Kwon admitted to deceiving investors about the stability and mechanics of TerraUSD, a stablecoin that dramatically failed in 2022.
Kwon's guilty plea follows his extradition from Montenegro and includes an agreement to forfeit over $19 million. He acknowledged failing to disclose an external firm's role in manipulating TerraUSD's peg to the U.S. dollar. Prosecutors claim Kwon built a deceptive financial ecosystem through Terraform Labs and misled investors to inflate cryptocurrency values for personal gain.
The collapse of TerraUSD and its companion token Luna in May 2022 led to massive investor losses worldwide and contributed to the broader "crypto winter." This event preceded 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.
The crypto industry continues to grapple with regulatory challenges and legal actions as authorities seek to hold individuals accountable for fraudulent activities that have undermined investor confidence and market stability.
