In a significant turn of events, Do Kwon, the former head of Terraform Labs, has accepted guilt for his role in a major cryptocurrency fraud that contributed to a significant market crash, costing investors over $40 billion. Kwon, who appeared in a New York court dressed in a yellow prison jumpsuit, pled guilty to two counts of fraud on Tuesday.
Kwon oversaw Terraform Labs, which launched the digital currencies TerraUSD and Luna, both of which saw a catastrophic collapse in 2022, instigating a widespread decline in the cryptocurrency market. U.S. prosecutors accused him of orchestrating a multi-billion dollar securities fraud tied to these digital assets. Under the terms of his plea deal, he faces a maximum sentence of 12 years in prison, with sentencing scheduled for December 11.
After a tumultuous legal journey that began when Kwon fled South Korea upon the issuance of an arrest warrant in 2023, he was apprehended in Montenegro before being extradited to the United States. Prosecutors alleged that Kwon misrepresented essential features intended to maintain the stablecoin's peg at $1. They claimed he secretly arranged for a trading firm to buy large quantities of TerraUSD to stabilize its value, misleading investors by attributing the stability to a computer algorithm, Terra Protocol.
"I made false and misleading statements about why [TerraUSD] regained its peg," Kwon admitted during the court proceedings. "What I did was wrong and I want to apologize for my conduct." Initially, he had pleaded not guilty to various charges, including securities fraud, wire fraud, and money laundering, and faced a daunting maximum of 135 years in prison.
As part of the plea agreement, Kwon has agreed not to contest the allegations laid out in his indictment, relinquishing assets valued at up to $19.3 million, alongside paying restitution. Although prosecutors intend to recommend a lower sentence, Judge Paul Engelmayer emphasized his ability to impose a sentence up to 25 years, pending Kwon's existing charges in South Korea, as highlighted by his attorney.
