Do Kwon, the South Korean entrepreneur behind the collapse of the TerraUSD and Luna cryptocurrencies, has pleaded guilty in a United States federal court to two counts of conspiracy to defraud and wire fraud. The plea marks a major development in a case stemming from one of the most significant failures in the cryptocurrency sector, which wiped out an estimated $40 billion in market value in 2022. Kwon, 33, appeared before Judge Paul Engelmayer in a Manhattan courtroom on Tuesday, reversing his earlier not-guilty plea.
He admitted to knowingly misleading investors about the stability of TerraUSD, a so-called stablecoin that was intended to maintain a $1 value through an algorithmic mechanism tied to the Luna token. Prosecutors said that during a May 2021 depegging event, Kwon falsely claimed that TerraUSD had regained its dollar value through automated market adjustments, when in fact an outside trading firm had intervened to purchase large quantities of the token to restore the peg.
As part of his plea agreement with the Manhattan U.S. Attorney’s Office, Kwon consented to forfeit more than $19 million in assets. While the charges carry a maximum sentence of 25 years, prosecutors indicated they would recommend a prison term of no more than 12 years if Kwon continued to accept responsibility for his actions. Sentencing is scheduled for December 11, 2025. Kwon co-founded Singapore-based Terraform Labs, which raised substantial investment from major venture capital firms before the spectacular collapse of its digital assets in 2022.
Do Kwon changes plea to guilty in US fraud case
The implosion of TerraUSD and Luna triggered a broader downturn in the cryptocurrency markets, accelerating the “crypto winter” that year and contributing to the collapse of other firms, including the high-profile bankruptcy of the FTX exchange. Prosecutors described Terraform’s products as fundamentally flawed and said Kwon engaged in deception to inflate their market value for personal and corporate gain. The fallout from the collapse was severe, particularly in South Korea, where many retail investors suffered heavy losses.
Reports of financial ruin and multiple suicides intensified public outrage. South Korean authorities issued an arrest warrant for Kwon in 2023, and Interpol circulated a red notice seeking his capture. He was detained in Montenegro in March 2023 while attempting to travel to the UAE using forged identification documents. Following legal proceedings in Montenegro, Kwon was extradited to the United States in December 2024.
Case seen as landmark in post-crash crypto prosecutions
Kwon and Terraform Labs also faced civil litigation in the United States. Earlier this year, the company agreed to a $4.55 billion settlement with the U.S. Securities and Exchange Commission (SEC), which included an $80 million personal penalty against Kwon and a ban on his participation in future cryptocurrency ventures. In that case, a jury found both Kwon and the company liable for misleading investors about the stability and viability of their products.
Addressing the court on Tuesday, Kwon expressed remorse for his actions. “What I did was wrong and I want to apologise for my conduct,” he said. “I take full responsibility.” Judge Engelmayer cautioned that Kwon’s conviction would likely result in his removal from the United States after serving part of his sentence and could affect his ability to enter the country in the future. The case continues to stand as one of the most high-profile examples of legal accountability in the aftermath of the 2022 cryptocurrency market crash. – By CryptoWire News Desk.