Terraform's leader, Do Kwon, Admits Financial Responsibility in the Company's Downfall
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In a significant turn of events, the U.S attorney for the Southern District of New York, Jay Clayton, announced Do Kwon's guilty plea in the Terra Luna fraud case. This development follows a series of events that began with the collapse of Terraform in 2022, resulting in billions of dollars in losses for investors worldwide.
Timeline
- 2023: Do Kwon was arrested in Europe while attempting to travel on a fake passport.
- 2025 (Earlier in the Year): Kwon initially pleaded not guilty to multiple fraud charges related to Terraform's operation and the collapse of Terra/Luna.
- August 11, 2025: Kwon announced plans to change his "not guilty" plea in the U.S. fraud case.
- August 12, 2025: Do Kwon pleaded guilty to conspiracy to commit fraud and one count of fraud.
Details of the Guilty Plea
- Charges: Kwon pleaded guilty to two charges: conspiracy to commit fraud and one count of fraud.
- Consequences: As part of his plea agreement, Kwon faces up to 25 years in prison according to prosecutors. He also agreed to forfeit more than $19 million in proceeds from his illegal schemes, including his interest in Terraform Labs and its cryptocurrencies.
- Impact: The fraud has driven significant losses, impacting thousands of people worldwide, making it one of the largest financial crimes in history.
- Background: The Terra blockchain and its algorithmic stablecoin TerraUSD (UST) collapsed in May 2022, wiping out approximately $50 billion in value. The collapse was exacerbated by the unsustainable offer of high interest rates through products like Anchor.
Terraform was marketed as a self-contained, decentralized financial ecosystem offering various financial products. However, investigations revealed that Terraform had control over key protocols such as Mirror Protocol and used trading bots to manipulate asset prices. Chai, a Korean payments platform, claimed to use the Terra blockchain, but it was found that traditional methods and networks were used for processing transactions around June 2019.
Do Kwon's sentencing is scheduled by Judge Engelmayer on December 11, 2025. The collapse of Terraform resulted in losses of over $40 billion. The market cap of UST and LUNA went over $50 billion around the start of 2022, largely due to misrepresentations about the company and its products.
Do Kwon received funding from several investment firms, primarily to purchase or loan cryptocurrencies created on the Terra blockchain, and became one of the most affluent leaders in the industry at the peak of Terraform's growth. He was charged with conspiring to commit commodities, securities, and wire fraud, and one count of committing wire fraud.
It is worth noting that the Luna Foundation Guard Ltd ("LFG") was launched around January 2022, claiming to maintain a cryptocurrency reserve worth billions to maintain UST's dollar peg, but Terraform actually had control over it. The former head of Terra, Do Hyeong Kwon, pled guilty to multiple counts of fraud related to Terraform.
This guilty plea marks a significant step towards accountability for the actions that led to the collapse of Terraform and the subsequent losses experienced by thousands of investors worldwide. The sentencing will provide closure and hopefully serve as a deterrent for similar fraudulent activities in the future.
[1] CNN [2] The New York Times [3] Bloomberg
- Do Kwon's guilty plea, in relation to the Terra Luna fraud case, has garnered significant attention in the realm of general-news, especially within the crypto and finance sectors.
- As a result of Do Kwon's fraudulent activities, the Terra blockchain remains a topic of interest in crime-and-justice reporting, as well as in discussions about the future of decentralized finance.
- The guilty plea by Do Kwon and the subsequent sentencing will have a far-reaching impact on the crypto market, causing investors to reassess their strategies when trading cryptocurrencies derived from blockchain platforms.
