In a dramatic turn of events that underscores the volatile intersection of cryptocurrency and the law, Do Kwon, the co-founder of Terraform Labs, has officially pleaded guilty to serious charges of wire fraud and conspiracy to defraud investors. This pivotal decision, made on Tuesday in the Southern District of New York, marks a significant shift from Kwon’s previous assertion of innocence. The plea deal now puts a spotlight on the tumultuous saga of the TerraUSD collapse, an incident that continues to resonate throughout the cryptocurrency community.
Kwon’s plea agreement comes with substantial implications. If he abides by the terms and refrains from committing any new offenses before sentencing, prosecutors have indicated they will recommend a reduced prison term of 12 years instead of the maximum 25 years possible, alongside financial penalties exceeding $19 million. However, the ultimate decision on his sentence will lie in the hands of Judge Paul Engelmayer, who reminded Kwon during proceedings that his fate remains in consideration. “It will be up to me to decide what a just sentence for you would be,” Engelmayer stated, as reported by Inner City Press.
#breaking: US has agreed to advocate for a sentence of 12 years for Do Kwon, not the guideline 25 years, if Kwon commits no new crimes. And fine of $19 million, and more. Inner City Press has been live tweeting the guilty plea proceeding, below https://t.co/CXcAjflNaN— Inner City Press (@innercitypress) August 12, 2025
As Kwon faced questioning, he candidly acknowledged the gravity of his actions, confirming his understanding of the charges and the ramifications of his plea. “Between 2018 and 2022 in the SDNY and elsewhere, I knowingly agreed to participate in a scheme to defraud purchasers of cryptocurrencies from my company, Terraform Labs,” Kwon declared in court. He confessed to making deceptive statements regarding the stabilization of TerraUSD’s $1 peg, admitting he was aware of the falsehoods he propagated.
The charges against Kwon stem from the catastrophic failure of TerraUSD, an algorithmic stablecoin that once commanded a market value of billions but plummeted in May 2022, resulting in significant losses for investors and sparking widespread turmoil across the crypto landscape. The fallout prompted legal actions not only in the United States but also in South Korea, where authorities sought Kwon’s extradition. Kwon’s international odyssey culminated in his arrest in Montenegro in March 2023 while he was traveling with forged documents, leading to his eventual extradition to the U.S. in December.
🚨 Montenegro has approved the extradition of crypto entrepreneur Do Kwon to the U.S. for prosecution.#DoKwon #UShttps://t.co/5PSKpZf2Ja— Cryptonews.com (@cryptonews) December 27, 2024
During the court proceedings, Assistant U.S. Attorney Sarah Ravener elaborated on the terms of Kwon’s plea deal. The agreement limits the potential sentence to a statutory maximum of 25 years, but the push for a lower 12-year term hinges on Kwon’s acceptance of responsibility and commitment to staying out of trouble. Kwon’s admission included his acknowledgment of a scheme to mislead investors regarding the mechanisms that supported TerraUSD, even as the cryptocurrency faced a critical crisis, undermining investor confidence.
Do Kwon: I made false statements about how the peg was restored, and the role of another firm. I knew my statements were false…Judge: You agreed with others?Do Kwon: Yes, with others to engage in a scheme to defraudJudge: Thank you.— Inner City Press (@innercitypress) August 12, 2025
The legal drama surrounding Do Kwon has captivated the cryptocurrency world, highlighting the clash between ambitious innovation and the rule of law. As the case unfolds, Kwon’s sentencing on December 11 will not only dictate his personal destiny but could also set a significant precedent for the treatment of fraud in the evolving crypto landscape. The impacts of TerraUSD’s collapse reverberated beyond Kwon himself, leading to a wave of bankruptcies and toughened regulatory scrutiny across the globe.
Adding to the complexity, the U.S. Securities and Exchange Commission (SEC) has also charged Kwon and Terraform Labs with civil fraud, alleging egregious violations of federal securities laws. In a notable verdict earlier in 2024, a jury found them guilty of misleading investors regarding TerraUSD’s stability and falsely promoting the use of Terraform’s blockchain in a Korean payment app known as Chai. A settlement agreed upon involved a staggering $4.47 billion, obligating Kwon and his company to cease operations and repay creditors.
⚖️ Do Kwon, co-founder of Terraform Labs, faces up to 130 years in prison on multiple fraud charges after his extradition to the U.S.#DoKwon #Prisonhttps://t.co/KLQUey98Y3— Cryptonews.com (@cryptonews) January 3, 2025
As Kwon prepares for his sentencing, his case remains a focal point for discussions about accountability in the cryptocurrency realm. Comparing Kwon’s situation to that of other notable crypto figures facing similar charges, like former FTX CEO Sam Bankman-Fried—who received a 25-year sentence for his part in a major finance debacle—provides a chilling insight into the potential consequences of digital financial misdeeds.
🏛️ A post-trial schedule for Roman Storm’s case has been set as federal prosecutors decide whether or not to retry the developer.#RomanStorm #TornadoCashhttps://t.co/OjMG5qk5fl— Cryptonews.com (@cryptonews) August 12, 2025
As the legal proceedings continue to unfold, Stephen Kwon’s plea serves as an alarm bell for the cryptocurrency sector, emphasizing the critical need for transparency and ethical conduct. With a landscape marked by hype and speculation, the final outcome will not only affect one individual but could alter the framework of governance within the entire industry. What lessons will be gleaned from this saga, and how will the future of cryptocurrency evolve in response to such high-profile legal challenges? Only time will tell.