Do Kwon pleads guilty to fraud charges in US over TerraUSD collapse
Terraform Labs founder Do Kwon admitted to defrauding investors over the stability of his cryptocurrency TerraUSD, in a plea deal that could see him serve up to 12 years in prison.
- Guilty plea: Kwon pleaded guilty on 12 August 2025 in New York to two counts of conspiracy to defraud and wire fraud.
- Prosecutors’ stance: The US government will seek a sentence of no more than 12 years if Kwon accepts full responsibility.
- Background: The 2022 collapse of TerraUSD and Luna wiped out US$40 billion in investor value, sparking a global crypto downturn.
SINGAPORE: Do Kwon, the South Korean entrepreneur behind Terraform Labs, pleaded guilty on 12 August 2025 to two counts of conspiracy to defraud and wire fraud.
The plea, entered at a federal court hearing in New York, came under an agreement with the Manhattan US attorney’s office. Kwon admitted to misleading investors in 2021 about the stability of TerraUSD, a so-called stablecoin.
Kwon, 33, had faced a nine-count indictment in January that included securities fraud, commodities fraud, and money-laundering conspiracy. These charges were narrowed under the plea deal.
Prosecutor Kimberly Ravener said the government would advocate for a prison term of no more than 12 years if Kwon accepts full responsibility. Sentencing by Judge Paul Engelmayer is set for 11 December 2025.
Kwon has been in custody since his extradition from Montenegro in late 2024.
According to prosecutors, TerraUSD was marketed as maintaining a US$1 value through an algorithm known as the “Terra Protocol.” When the coin slipped below its peg in May 2021, Kwon claimed the algorithm restored stability.
In reality, prosecutors alleged he arranged for a high-frequency trading firm to secretly purchase millions of dollars’ worth of TerraUSD to prop up its price. The deception encouraged investors to buy Terraform products, boosting the value of Luna – a related cryptocurrency – to US$50 billion by spring 2022.
The collapse of TerraUSD and Luna in 2022 wiped out an estimated US$40 billion, contributing to a broader cryptocurrency market downturn.
“I made false and misleading statements about why it regained its peg by failing to disclose a trading firm’s role in restoring that peg,” Kwon said in court. “What I did was wrong.”
Kwon is among several cryptocurrency figures charged following the 2022 market crash. Sam Bankman-Fried, former FTX chief, was sentenced to 25 years in prison in 2024.
In April 2024, Kwon agreed to pay US$80 million as part of a US Securities and Exchange Commission settlement totalling US$4.55 billion. The deal included a permanent ban on his involvement in cryptocurrency transactions.
Kwon also faces charges in South Korea. Under the US plea agreement, prosecutors will not oppose his transfer abroad after serving half of his sentence.
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