Do Kwon Pleads Guilty to Fraud in the Collapse of Terra LUNA Worth 40 Billion USD

Do Kwon has pleaded guilty to conspiracy to commit fraud and wire fraud in federal court in Manhattan. He also acknowledged his role in the collapse of the Terra ecosystem, which caused around 40 billion USD in investments to evaporate in 2022. The 33-year-old South Korean entrepreneur is a co-founder of Terraform Labs and created the stablecoin TerraUSD along with the token Luna before they collapsed. Kwon pleaded not guilty to the nine-count indictment in January before pleading guilty before Judge Paul Engelmayer. He was charged with securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering for his role in running the Terra ecosystem. The Manipulation of the Secret Trading Company Has Supported the Failing Stablecoin Prosecutors allege that when TerraUSD lost its peg of 1 USD in May 2021, Kwon falsely claimed that an algorithmic system called "Terra Protocol" had automatically restored the stability of the coin. Instead, to artificially maintain the peg, he hired a high-frequency trading firm to secretly buy millions of dollars of TerraUSD tokens. This fraudulent behavior has helped Kwon maintain investor confidence while concealing the underlying instability of the stablecoin mechanism. Misleading claims about the stability of the algorithm have encouraged both retail and institutional investors to purchase Terraform products. This has driven the value of Luna up to 50 billion USD. In court, Kwon apologized for his actions. He stated that he had made "misleading and deceptive statements about why the company restored the peg by failing to disclose the role of a trading company in restoring that peg." He acknowledged that his actions were wrong and took responsibility for deceiving investors. The Judgment and Financial Penalties Create Legal Precedent U.S. Attorney in Manhattan, Jay Clayton, called Kwon's actions "one of the largest frauds in history". Kwon faces a sentence of up to 25 years in prison when sentenced on December 11, although prosecutors have agreed to recommend a sentence of no more than 12 years if he takes responsibility. Previously, Kwon agreed to pay a civil penalty of 80 million USD and accepted a lifetime ban on cryptocurrency trading as part of a 4.55 billion USD settlement with the Securities and Exchange Commission reached in 2024. This agreement resolves separate civil violations related to criminal charges. Kwon has been detained since being extradited from Montenegro late last year, after months of legal disputes regarding his transfer to the United States. His detention follows his arrest while trying to use fake documents to travel.