Do Kwon, the 33-year-old South Korean entrepreneur behind the spectacular implosion of the TerraUSD and Luna cryptocurrencies, has pleaded guilty to two US charges of conspiracy to defraud and wire fraud.
The plea, entered in a Manhattan federal court before US District Judge Paul Engelmayer, marks a dramatic shift from Kwon’s earlier stance in January, when he pleaded not guilty to a nine-count indictment. That indictment had accused him of securities fraud, wire fraud, commodities fraud, and money laundering conspiracy.
Kwon co-founded Singapore-based Terraform Labs and was the architect of TerraUSD, a so-called stablecoin designed to maintain a constant value of $1, and Luna, its volatile sister token. Together, they once commanded a combined market value of about $50 billion before their collapse in 2022.
Prosecutors Detail One of the “Largest Frauds in History”
According to prosecutors, Kwon misled investors in 2021 by claiming that TerraUSD’s $1 peg had been restored solely by a computer algorithm known as the “Terra Protocol.” In reality, they allege, he had orchestrated a covert rescue by enlisting a high-frequency trading firm to purchase millions of dollars’ worth of TerraUSD, artificially shoring up its price.

Manhattan US Attorney Jay Clayton
Manhattan US Attorney Jay Clayton did not mince words, calling the scheme “one of the largest frauds in history,” fuelled by “technological promise and investment euphoria” in the cryptocurrency market.
Prosecutors argue that this deception and other misleading statements drove both retail and institutional investors to pour money into Terraform’s products, inflating Luna’s value dramatically. When TerraUSD lost its peg again in 2022, the collapse wiped out an estimated $40 billion, triggering broader turmoil in digital asset markets.
Sentencing Could See Up to 25 Years, But Deal Caps at 12
Under the plea agreement with the Manhattan US Attorney’s Office, Kwon faces a maximum of 25 years in prison when sentenced on 11 December. However, prosecutor Kimberly Ravener confirmed that the government would recommend a term of no more than 12 years if Kwon fully accepts responsibility for his crimes.
In court, Kwon apologised for his conduct. “I made false and misleading statements about why [TerraUSD] regained its peg by failing to disclose a trading firm’s role in restoring that peg. What I did was wrong,” he said.
The agreement also includes a provision that US prosecutors will not oppose Kwon’s application to be transferred abroad after serving half of his sentence, a point that could be significant, as he also faces criminal charges in South Korea.
Heavy Civil Penalties and Global Legal Fallout
This criminal plea follows a separate civil case in which Kwon and Terraform Labs agreed in 2024 to pay an $80 million fine as part of a record-breaking $4.55 billion settlement with the US Securities and Exchange Commission. That settlement also imposed a permanent ban on Kwon from participating in cryptocurrency transactions.
Kwon has been in custody since his extradition from Montenegro in late 2024. His arrest there followed months on the run after an Interpol “red notice” was issued for his capture.
The TerraUSD and Luna disaster remains one of the most infamous episodes in crypto history, alongside the collapse of FTX and other high-profile failures during the 2022 digital asset downturn. The episode spurred increased regulatory scrutiny worldwide, particularly of stablecoins, digital assets pegged to traditional currencies, which many authorities now view as high-risk financial products if not fully backed and transparently managed.
Broader Implications for the Cryptocurrency Industry
Kwon’s case is part of a wider crackdown on cryptocurrency executives accused of misconduct during the industry’s boom years. Several prominent figures have faced charges in the US since the 2022 market crash, as authorities seek to restore investor confidence and curb fraudulent behaviour in the sector.
The outcome of Kwon’s sentencing could set a precedent for how aggressively US courts punish misconduct involving stablecoins, which are increasingly under the spotlight from lawmakers and regulators.
For now, Kwon’s guilty plea closes a key chapter in the Terra saga, but with trials pending in South Korea and continued investor lawsuits worldwide, the legal consequences of the $40 billion implosion are far from over.