FTX Fallout Echoes as Do Kwon Considers Guilty Plea in TerraUSD Collapse

Terraform Labs co-founder Do Kwon is reportedly considering a guilty plea in the U.S. criminal case tied to the catastrophic $40 billion collapse of the TerraUSD (UST) stablecoin in 2022. A hearing scheduled for August 12, 2025, will determine whether Kwon changes his initial not-guilty plea to charges including fraud, market manipulation, and money laundering. The downfall of UST—an algorithmic stablecoin pegged to LUNA—triggered a ripple effect across the cryptocurrency market, reminiscent of the FTX collapse. This development marks a significant moment in the ongoing scrutiny of crypto industry practices and regulatory oversight.

Do Kwon May Plead Guilty in $40B TerraUSD Collapse Case

Terraform Labs co-founder Do Kwon is reportedly considering a guilty plea in the U.S. criminal case tied to the catastrophic $40 billion collapse of the TerraUSD (UST) stablecoin in 2022. A hearing scheduled for August 12, 2025, will determine whether Kwon changes his initial not-guilty plea to charges including fraud, market manipulation, and money laundering.

The downfall of UST—an algorithmic stablecoin pegged to LUNA—triggered a domino effect across crypto markets, contributing to the implosion of major firms like FTX. Kwon, extradited from Montenegro after arrest for traveling with falsified documents, remains in U.S. custody as prosecutors negotiate a potential plea deal. Parallel charges in South Korea loom, ensuring legal repercussions extend beyond U.S. jurisdiction.

Terraform Labs, now bankrupt, maintains its innocence despite the seismic market disruption caused by its failed stablecoin experiment. The case underscores the regulatory risks of algorithmic stablecoins and their systemic impact on crypto ecosystems.

Fenwick & West Sued for Alleged Role in FTX Collapse

Silicon Valley law firm Fenwick & West faces a lawsuit filed on August 11, 2025, accusing it of playing a central role in the FTX fraud. The complaint alleges the firm provided legal cover for Sam Bankman-Fried's misuse of customer funds through shell companies like North Dimension, a subsidiary of Alameda Research.

Prosecutors invoke RICO statutes typically reserved for organized crime, claiming Fenwick actively facilitated fraud rather than merely offering counsel. The case forms part of a broader legal action involving 130 firms, though Fenwick stands alone in facing fraud charges under a specialized 'Law Firm Track.'

FTX's November 2022 collapse revealed billions in customer funds had been diverted to prop up Bankman-Fried's other ventures. Legal analysts note the difficulty in proving law firms bear responsibility for clients' criminal misuse of their services.