Do Kwon, the co-founder and former CEO of Terraform Labs, has entered a guilty plea for his role in schemes that caused significant losses for investors and users in the cryptocurrency space. As reported by the U.S. Attorney's Office for the Southern District of New York, Kwon admitted to conspiring to commit commodities fraud, securities fraud, and wire fraud, and also to one count of actually committing wire fraud. This comes after allegations that the blockchain and cryptocurrency company made false promises about its digital assets and financial stability.
According to public court documents and announcements from the U.S. Attorney, Kwon deceived investors with claims that the Terra blockchain could maintain the value of its stablecoin, TerraUSD (UST), through their so-called "Terra Protocol." However, the protocol was unable to maintain UST's $1 value, leading Kwon to collude with traders to artificially inflate the stablecoin's price. U.S. Attorney Jay Clayton remarked, "Do Kwon used the technological promise and investment euphoria around cryptocurrency to commit one of the largest frauds in history," in a statement underscoring Kwon's deceptive practices. Kwon is expected to completely forfeit over $19 million as part of his plea and faces a potential maximum sentence of 25 years in prison.
Terraform's products, including UST and its native token LUNA, claimed a combined apparent market value of over $50 billion during their peak. But when the UST’s stability was compromised in May 2022, investors were left to grapple with over $40 billion in losses as the value of UST and LUNA plummeted. Kwon's arrest in Europe last year and subsequent extradition to the United States has led to this landmark legal proceeding, signaling a shift towards accountability in the digital asset market.
The Federal Bureau of Investigation and international law enforcement partnered to apprehend Kwon, highlighting the global impact of his fraudulent behavior and the concerted effort to address it. The case is currently being handled by the Office’s Securities and Commodities Fraud Task Force, with Assistant U.S. Attorneys Marguerite B. Colson, Sarah Mortazavi, Kimberly Ravener, and Andrew Thomas overseeing the prosecution. Kwon is slated for sentencing on December 11, following his guilty plea.
