Do Kwon Admits Guilt in U.S. Fraud Case Tied to Terra’s Spectacular Collapse

Terra's mastermind finally faces the music—Do Kwon's guilty plea sends shockwaves through crypto.

From algorithmic darling to courtroom spectacle: How the 'stablecoin' empire crumbled.

Prosecutors carve up Kwon's legacy—one fraud charge at a time. Meanwhile, Wall Street still can't decide if crypto is a scam or its next revenue stream.

Kwon Faced with 12 Years Behind Bars

According to Reuters report, Kwon had been facing nine charges from U.S. authorities, including securities fraud and money laundering. By pleading guilty to two, he avoided going to trial on the rest. 

Prosecutors and Kwon’s lawyers reached a deal that includes $19 million in financial penalties. If the judge followed the statutory maximum, Kwon could face up to 25 years in prison, but under the agreement, prosecutors will not push for more than 12 years. Sentencing is set for December 11, 2025.

In court, Kwon apologized. “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,” he told the judge. “What I did was wrong.” His case is one of several high-profile prosecutions of cryptocurrency figures after a major market slump in 2022.

How It all Started

Prosecutors said Kwon misled investors in 2021 about why TerraUSD, a stablecoin he helped create, regained its $1 value after briefly falling. They said he claimed an algorithm called “Terra Protocol” fixed the price, but in truth, a high-frequency trading firm secretly bought millions of dollars’ worth of the token to boost its value. 

These actions, prosecutors alleged, encouraged more people to invest, driving the price of Luna, another token tied to TerraUSD to $50 billion in value by early 2022.

After the Terra crash, which erased about $40 billion in value, Kwon’s location remained unknown for months. Montenegrin authorities eventually arrested him for traveling with falsified documents. He served four months in prison there while both the U.S. and South Korea sought extradition. He was brought to the U.S. in January 2025 and remained in custody without bail.

In 2024, Kwon and Terraform Labs reached a $4.55 billion settlement with the U.S. Securities and Exchange Commission. As part of that deal, Kwon agreed to an $80 million civil fine and a ban from crypto-related transactions. 

Meanwhile, he still faces criminal charges in South Korea. Prosecutors in New York said they will not oppose his request to serve part of his sentence there after completing half of it in the U.S.

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