- Do Kwon will plead guilty to conspiracy and wire fraud in U.S. court over the TerraUSD collapse.
- Prosecutors allege he falsely claimed an algorithm restored TerraUSD’s value while secretly arranging market support.
- The SEC previously fined Kwon $80 million and banned him from cryptocurrency transactions in a $4.55 billion settlement.
Do Kwon, the co-founder of the collapsed Terraform Labs, will plead guilty to conspiracy and wire fraud charges in a U.S. federal court. The plea follows allegations that he misled investors about the stability of TerraUSD, a stablecoin that collapsed in 2022 alongside its sister token, Luna, erasing around $40 billion in market value.
U.S. District Judge Paul Engelmayer confirmed Kwon’s intention to change his plea during a hearing on August 12. The 33-year-old entrepreneur had previously pleaded not guilty in January to a nine-count indictment.
As we reported, this move was expected. Here was CoinEdition’s report on the anticipated plea change.
The Deception at the Heart of the Case
Prosecutors allege that in May 2021, when TerraUSD fell below its $1 peg, Kwon falsely claimed that an algorithm known as the “Terra Protocol” restored its value.
In reality, authorities say he arranged for a high-frequency trading firm to buy millions of dollars’ worth of TerraUSD, artificially supporting its price.
These actions allegedly misled retail and institutional investors, prompting further purchases of Terraform’s products. The increased demand contributed to Luna’s market capitalization reaching about $50 billion by the spring of 2022.
SEC Settlement and Crypto Ban
This criminal case is separate from the civil suit brought by the U.S. Securities and Exchange Commission. In 2024, Kwon and Terraform Labs settled that case, agreeing to pay a massive $4.55 billion penalty and accepting a ban on participating in crypto transactions.
The SEC case centered on claims that Terraform Labs and Kwon misrepresented the stability and functionality of TerraUSD, causing significant losses when the stablecoin and Luna collapsed.
Kwon has been in U.S. custody since his extradition from Montenegro late last year. He was arrested there in 2023 for using forged travel documents and served a sentence before his transfer.
The upcoming plea hearing will include a detailed exchange between Judge Engelmayer and Kwon, ensuring the defendant understands the charges and consequences before formally entering his guilty plea.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
