Journalist
Hassan Shittu
Journalist
Hassan Shittu
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Terraform Labs co-founder Do Kwon has pleaded guilty to two felony counts of wire fraud and conspiracy to defraud, ending a prolonged legal standoff with U.S. prosecutors.
The plea deal, entered Tuesday in the Southern District of New York, marks a sharp reversal from Kwon’s earlier not-guilty stance.
Under the reported agreement, prosecutors will recommend a 12-year prison sentence, far below the maximum of 25 years, provided Kwon commits no new crimes before sentencing. He will also face more than $19 million in financial penalties, and sentencing is set for December 11.
Do Kwon Admits to Defrauding Investors Over TerraUSD Peg
Judge Paul Engelmayer reminded Kwon in court that the final decision rests with him. “It will be up to me to decide what a just sentence for you would be,” Engelmayer said, according to Inner City Press, which live-tweeted the proceedings.
Kwon, 33, confirmed under questioning that he understood the charges, the potential penalties, and his decision to waive a trial.
“Between 2018 and 2022 in the SDNY and elsewhere, I knowingly agreed to participate in a scheme to defraud purchasers of cryptocurrencies from my company, Terraform Labs,” Kwon told the court.
He admitted making false statements about how TerraUSD’s peg was restored and the role of another firm, acknowledging he knew those statements were untrue.
The two counts, conspiracy to defraud and wire fraud, stem from the collapse of TerraUSD, the algorithmic stablecoin once valued at billions of dollars.
TerraUSD was designed to maintain a $1 peg through its relationship with sister token, Luna, but the system unraveled in May 2022, wiping out tens of billions in value and sparking a cascade of failures across the crypto sector.
The collapse led to criminal charges in the U.S. and South Korea, with both countries seeking Kwon’s extradition. He was arrested in Montenegro in March 2023 for traveling with forged documents and was later extradited to the United States in December.
Prosecutors say Kwon and his company misled investors about the stability of TerraUSD and the mechanisms supporting it, including during the crisis that ultimately caused its implosion.
In addition to the criminal case, the U.S. Securities and Exchange Commission (SEC) brought civil fraud charges in February 2023, alleging violations of federal securities laws.
In April this year, a jury found both Terraform Labs and Kwon liable for civil fraud, siding with the SEC’s claims that they deceived investors in connection with the buying and selling of Terraform securities.
In court on Tuesday, Assistant U.S. Attorney Sarah Ravener outlined the terms of the plea deal.
The agreement locks in the statutory maximum of 25 years as the guidelines, but stipulates that if Kwon accepts responsibility and stays out of trouble, the government will advocate for a sentence not exceeding 12 years.
The deal also includes forfeiture terms and prevents Kwon from appealing any sentence of 25 years or less.
Kwon acknowledged the facts of the indictment and confirmed his signature on the plea agreement. “I am agreeing not to contest the factual allegations,” he said. When asked if he knew his actions were illegal, Kwon replied, “I didn’t understand the details of international statutes… but yes, Your Honor.”
The case against Kwon has been one of the most closely watched legal battles in crypto’s short history, pitting regulators and prosecutors against a high-profile founder whose project’s collapse reverberated through global markets.
His sentencing on December 11 will determine the extent of his punishment, but his admission of guilt marks a decisive moment in the saga that began with one of the largest failures the crypto industry has seen.
As Judge Engelmayer told him in court, the final word on his fate is yet to come.
Do Kwon’s Plea Joins List of Major U.S. Crypto Fraud Convictions
Kwon spent months in detention as authorities considered extradition requests from the U.S. and South Korea. The collapse of TerraUSD triggered a wave of bankruptcies and heightened global regulatory scrutiny.
In April 2024, the SEC won a civil fraud case against Kwon and Terraform, with a jury finding that they misled investors about the stability of TerraUSD and falsely claimed that Chai, a Korean payments app, used Terraform’s blockchain. Under a $4.47 billion settlement, they agreed to shut down operations and repay creditors.
Kwon still faces a nine-count U.S. criminal indictment, including securities and wire fraud. Judge Paul Engelmayer has ordered his defense to submit a detailed statement of the charges he plans to admit to.
Comparable cases in the Southern District of New York have drawn lengthy sentences, including 25 years for former FTX CEO Sam Bankman-Fried in 2024.
Meanwhile, Tornado Cash co-founder Roman Storm awaits sentencing after being convicted of operating an unlicensed money-transmitting service, with two charges still unresolved.
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