Do Kwon, the founder of Terraform Labs, has pleaded guilty to federal fraud charges related to the $40 billion collapse of TerraUSD and Luna in 2022. The plea was entered in a New York court, where he admitted to concealing crucial information about the stability of TerraUSD, which contributed to the market crash.
Kwon, 33, who co-founded Singapore-based Terraform Labs and developed the TerraUSD and Luna currencies, entered the plea at a court hearing in New York before U.S. District Judge Paul Engelmayer. He had pleaded not guilty in January to a nine-count indictment charging him with securities fraud, wire fraud, commodities fraud and money laundering conspiracy.
The U.S. Department of Justice alleges that Kwon misrepresented the stability of TerraUSD, a stablecoin designed to maintain a value of $1, by failing to disclose the role of a trading firm in restoring its peg. The admission of guilt was part of a plea agreement with the Manhattan U.S. Attorney’s office, which brought the charges against him for multiple fraud and money laundering offenses. Kwon faces up to 25 years in prison, though prosecutors have indicated they are seeking a sentence of no more than 12 years if he cooperates fully.
In his court statement, Kwon acknowledged that his actions were wrong and stated, ‘What I did was wrong.’ He admitted to making false and misleading statements about how TerraUSD regained its peg, which significantly impacted investor confidence and led to the subsequent collapse of the Terra ecosystem.