Do Kwon, the South Korean founder of Terraform Labs, has pleaded guilty in the United States to two counts of fraud tied to the $40 billion collapse of TerraUSD and Luna, according to court proceedings in Manhattan on Tuesday.
The 33-year-old reversed the not-guilty plea he entered in December after being extradited from Montenegro. His courtroom admission marks a major turn in a case that has followed him since the 2022 crash of his crypto empire.
Kwon, who co-founded Terraform Labs before its bankruptcy, told the court that he knowingly took part in a scheme to mislead buyers of Terraform securities and crypto tokens.
“What I did was wrong and I want to apologise for my conduct,” he said in front of U.S. District Judge Paul Engelmayer. Dressed in a bright yellow jumpsuit with wrists and ankles chained, Kwon also agreed to give up more than $19 million under the deal.
Prosecutors outline schemes and collapse impact
The indictment filed in January accused Kwon of “orchestrating schemes to defraud purchasers of cryptocurrencies” and building a financial structure “on lies and manipulative and deceptive techniques.”
Prosecutors said Terraform’s main products did not function as claimed, yet Kwon promoted them heavily to raise the value of coins he personally owned in large amounts.
At its peak, TerraUSD was one of the largest algorithmic stablecoins, designed to maintain a value pegged to the U.S. dollar. When it collapsed in 2022 alongside its partner token Luna, it erased tens of billions in market value.
The failure was a key trigger for the so-called crypto winter of that year, which also saw the collapse of FTX and the conviction of its founder, Sam Bankman-Fried, now serving 25 years in prison for fraud.
Kwon once called Terra “the oldest and most widely used algorithmic stablecoin in existence,” attracting about 280,000 investors, including major U.S. crypto venture capital firms.
But after the crash, South Korean retail investors suffered heavy losses. Media reports linked the financial destruction to multiple suicides, fueling public anger in Kwon’s home country.
Legal consequences and connections to other cases
Kwon’s guilty plea covers conspiracy to commit securities fraud, wire fraud, and commodities fraud, along with a separate count of wire fraud. He faces a maximum sentence of 25 years in prison, but the U.S. government said it will ask for no more than 12 years when sentencing takes place in December.
Judge Engelmayer warned that as a non-U.S. citizen, Kwon will likely be removed from the country after serving his sentence, with possible long-term restrictions on entry.
Among Terraform’s investors was Binance founder Changpeng Zhao, who later pleaded guilty in the U.S. to failing to prevent money laundering. Terraform Labs itself agreed last year to pay $4.5 billion to settle a civil fraud case brought by the U.S. Securities and Exchange Commission.
Kwon was arrested in Montenegro in March 2023 while trying to fly to the United Arab Emirates using a forged Costa Rican passport. The UAE does not have an extradition treaty with the U.S., which prosecutors say made it a preferred destination for his escape attempt. South Korea had also sought his extradition.
His plea comes shortly after a string of other U.S. crypto crime cases. Last week, Roman Storm, co-founder of crypto mixer Tornado Cash, was convicted of conspiring to operate a money laundering business that moved more than $1 billion in illicit funds.
As Cryptopolitan reported, Tornado Cash still operates after the U.S. Treasury lifted sanctions in March following a campaign partly funded by Coinbase. In a separate case, Keonne Rodriguez and William Lonergan Hill, CEO and CTO of crypto mixer Samourai Wallet, pleaded guilty to running a money transmitting business that handled over $200 million in criminal proceeds.
Kwon’s sentencing in December will close one chapter of a case that has stretched from Seoul to the Balkans to New York, pulling in major industry names and forcing the crypto market to reckon with one of its most costly and public failures.
