The dramatic downfall of cryptocurrency mogul Do Kwon reached a turning point this week as the 33-year-old admitted in a New York courtroom to defrauding investors in one of the most catastrophic collapses in digital currency history.
The guilty plea follows the implosion of TerraUSD and Luna, which wiped out $40 billion (£29.47 billion) in market value and rattled the entire cryptocurrency sector.
The confession brings a long legal battle to a close, with the consequences including a prison sentence and a $19 million (£14 million) forfeiture.
On Tuesday, the South Korean founder of two cryptocurrencies that collapsed and caused a market crash in 2022, Do Kwon, admitted his guilt to two US charges. These were conspiracy to defraud and wire fraud.
From Denial to Guilty Plea
The 33-year-old co-founder of Singapore-based Terraform Labs, Do Kwon, formally changed his plea to guilty during a federal court hearing in New York.
The admission reverses his earlier stance from January, when he had pleaded not guilty to a nine-count indictment on a range of charges, including securities fraud, wire fraud, commodities fraud, and money laundering conspiracy.
Kwon confessed to the two counts as part of an agreement with the Manhattan US Attorney’s office, which had brought the charges. The plea resolves accusations that he deceived investors in 2021 about TerraUSD, a ‘stablecoin’ designed to maintain a value of $1 (£0.74).
Prosecutors say Kwon misled investors about the stability and decentralisation of the project, masking the fact that its systems were flawed and open to manipulation.
The Promise and the Deception
Kwon co-founded Terra, aiming to develop a more efficient payment system utilising blockchain technology. According to a Forbes report, the company’s stablecoin, which shared its name, attracted 40 million users to its platform at its January 2018 launch.
According to a press release from the US Attorney’s Office, Southern District of New York, Kwon’s guilty plea was entered on 12 August before US District Judge Paul A. Engelmayer.
The statement also revealed that, without the knowledge of investors and users, the company’s main products did not work as advertised and had been manipulated to create the false impression of a decentralised and functioning financial system.
Sentencing and Settlement
When Judge Engelmayer sentences him on 11 December, Kwon could face a prison term of up to 25 years. The prosecutor, Kimberly Ravener, noted that the government would, however, recommend a sentence of no more than 12 years, provided he takes responsibility for his crimes. He has been in custody since his extradition from Montenegro late last year.
Tremendous work by former @SECGov Chair Jay Clayton and the SDNY in securing Do Kwon’s guilty plea. Fraudulent misrepresentation and market manipulation have no place in crypto. Great to see the bad actors getting removed, one by one.https://t.co/1PQSaWni2W
— Jerry Kowal (@JerryKowal15) August 13, 2025
Part of a Broader Crackdown
Kwon is one of several cryptocurrency moguls who have faced federal charges in the wake of a 2022 slump in digital token prices that prompted the collapse of multiple companies. Another high-profile figure is Sam Bankman-Fried, founder of the US’s largest crypto exchange, FTX, who received a 25-year prison sentence in 2024.
A Confession of Deception
When TerraUSD lost its $1 (£0.74) peg in May 2021, prosecutors said Kwon told investors a computer algorithm had fixed the problem. The truth, they said, was that he had secretly hired a high-frequency trading firm to purchase millions of dollars’ worth of the stablecoin to inflate its price artificially.
Prosecutors said Kwon’s false claim, along with others, led investors to purchase Terraform products. As a result, Luna — a separate token that fluctuated in value but was closely linked to TerraUSD — reached a valuation of $50 billion (£36.83 billion) by the spring of 2022.
‘I made false and misleading statements about why it regained its peg by failing to disclose a trading firm’s role in restoring that peg,’ Kwon stated in court, offering an apology for his actions. ‘What I did was wrong.’
The Final Price
In 2024, Kwon and Terraform reached a $4.55 billion (£3.35 billion) settlement with the US Securities and Exchange Commission. As part of the agreement, he consented to an $80 million (£58.93 million) civil fine and a ban on all future cryptocurrency transactions.
The plea agreement also has implications for the separate charges Kwon faces in his native South Korea. According to Ravener, prosecutors will not object if he applies to be transferred there after completing half of his US sentence.
What began as a bold promise to transform payments has ended in prison time, financial ruin, and a cautionary tale for millions of investors.
