In a significant legal turn, Do Kwon, the former CEO of Terraform Labs, has pleaded guilty to two counts of fraud in a New York court. This admission arises from the catastrophic failure of two cryptocurrencies he oversaw, leading to losses of over $40 billion. While he faces sentencing in December, this plea marks a pivotal moment for accountability in the cryptocurrency sector.
Former Crypto Executive Do Kwon Admits Guilt in $40 Billion Fraud Case
Former Crypto Executive Do Kwon Admits Guilt in $40 Billion Fraud Case
Do Kwon, once at the helm of Terraform Labs, pleads guilty to fraud following the collapse of TerraUSD and Luna.
Do Kwon, the former tech executive from South Korea, made headlines this week as he pleaded guilty to two counts of fraud in a New York courtroom. The case stems from his role as the CEO of Terraform Labs, where he was accused of playing a key part in the collapse of the cryptocurrencies TerraUSD and Luna. This collapse triggered a domino effect throughout the crypto market, resulting in a staggering loss exceeding $40 billion for investors.
Federal prosecutors described Kwon's actions as part of a “multi-billion dollar crypto asset securities fraud.” As part of his plea agreement, Kwon may receive a maximum sentence of 12 years, with his sentencing set for December 11. Todd Snyder, appointed by US authorities to oversee Terraform Labs’ liquidation, emphasized that this guilty plea highlights the need for accountability in the digital asset space.
Kwon's legal troubles began when he fled South Korea following the issuance of an arrest warrant in 2023. After traveling to Montenegro, he was apprehended and later extradited to the US. Prosecutors allege that Kwon misrepresented the stability mechanisms of TerraUSD, falsely claiming it was tied to a computer algorithm called Terra Protocol. They maintain that Kwon orchestrated secret trading activities to artificially maintain the stablecoin’s value, which ultimately misled investors and bolstered the market for Luna.
Admitting his wrongdoing, Kwon stated in court, “In 2021, I made false and misleading statements about why [TerraUSD] regained its peg,” and expressed regret for his misconduct. Initially pleading not guilty to nine counts, including securities fraud and conspiracy to commit money laundering, Kwon was at risk of a lengthy prison sentence amounting to 135 years had the charges stuck.
As part of the plea deal, Kwon will forfeit approximately $19.3 million, several properties and will also be mandated to pay restitution. While the prosecutor's request for a sentence is limited to 12 years, Judge Paul Engelmayer noted he could impose a sentence of up to 25 years should he choose, and Kwon may still face additional legal repercussions in South Korea, according to his attorney.
