Do Kwon Pleads Guilty in U.S. Fraud Case Over $40 Billion TerraUSD Collapse

Do Kwon pleads guilty to U.S. fraud charges over TerraUSD collapse, facing up to 25 years in prison.

Do Kwon, a South Korean cryptocurrency entrepreneur, pleaded guilty on Tuesday, August 12, 2025, to two U.S. charges. According to Reuters, these charges were conspiracy to defraud and wire fraud. Kwon, aged 33, co-founded Terraform Labs in Singapore. He has developed TerraUSD and Luna, two digital currencies that lost with 40 billion dollars in 2022. The plea occurred in a New York court in the presence of U.S. District Judge Paul Engelmayer.

Terra Founder Do Kwon Faces Up to 25 Years in Prison in TerraUSD Collapse Case

First, Kwon had earlier pleaded not guilty in January to a nine-count indictment. These charges were security fraud, wire fraud, commodities fraud, and conspiracy to launder money. In 2021, prosecutors said he had falsely told investors about TerraUSD, a stablecoin that was supposed to be worth a dollar. Kwon lied rather than telling the truth when he said that a computer algorithm, the so-called “Terra Protocol,” had stabilized TerraUSD value when it fell below the level of 1 dollar in May 2021. As a matter of fact, he had a trading company purchase millions of dollars of the token secretly in order to boost its price.

Consequently, investors thought that TerraUSD was stable. This inflated the price of an associated cryptocurrency, Luna, to 50 billion in the spring of 2022. When TerraUSD collapsed, however, this led to enormous losses. The crypto market shook due to many investors losing their savings. Kwon accepted his wrongdoing in court. He stated that he stated false and misleading reasons as to why it had recovered its peg by not revealing the role played by a trading firm in reviving that peg. My action was bad.

Related Reading: Do Kwon, Accused of Fraud, Pleads Not Guilty to U.S. Criminal Charges | Live Bitcoin News

Therefore, Kwon is exposed to a maximum 25 years in jail. He is to be sentenced on December 11, 2025. But, prosecutor Kimberly Ravener has told the court that in case Kwon takes responsibility, the government is willing to pursue no more than 12 years. Also, Kwon resolved with the U.S. Securities and Exchange Commission (SEC) in 2024. The settlement is worth 4.55 billion dollars with him agreeing to pay an 80 million civil fine and a prohibition of crypto transactions.

Terra Crash Sparked Global Regulatory Scrutiny

Meanwhile, Kwon’s legal troubles began after the TerraUSD collapse. He left South Korea, where Terraform Labs was based. For months, authorities searched for him. In 2023, in Montenegro, it was also there he was arrested by the police on charges pertaining to using forged documents. He would later be extradited to the United States to be charged with fraud. He is also accused in South Korea. In his U.S. plea deal, the prosecutors will recommend that no opposition be taken against the possibility of him being transferred to another country after he has served half of his sentence.

One of the largest crypto fails ever is the TerraUSD collapse. TerraUSD had a great number of investors since it was supposed to be a stable investment. When it crashed, other cryptocurrencies crashed as well, which brought a lot of panic. There were lawsuits in several countries. Also, the crash cast doubt on the stability of the crypto industry. The global regulators started examining Terraform Labs and its founders.

Regulators Eye Stricter Rules After TerraUSD Collapse

At this point, there is a twist in that Kwon pleaded guilty. It may reduce his trial and end in penalties in the form of either fines or imprisonment. Those who lost money will on the other hand attempt to recoup their losses. Additionally, regulators would be in a position to learn what went awry as a result of the case. This may result in even more restrictive regulations of crypto companies in the future.

But there is the crypto community left divided. There is an opinion that Kwon deceived investors and needs to be punished. Others reason that the fall happened due to the market forces rather than fraud. Nevertheless, the case shows the danger of crypto investing. It also motivates regulators to increase regulation in the use of digital currencies.

With the sentencing in December looming, the world is in observation. The guilty plea by Kwon is a reminder of the crypto industry issues. It demonstrates its dependence on the fast speed of trust disappearing when promises are not fulfilled. The investors and regulators are waiting with bated breath to get the next actions. The case can form the future field of crypto as a critical situation in this sector.