Kwon admits to committing fraud in two instances
Terraform Labs Co-Founder Do Kwon Pleads Guilty to Fraud
In a significant turn of events, Terraform Labs co-founder Do Kwon pleaded guilty in August 2025 to two federal fraud charges related to the $40 billion collapse of the Terra cryptocurrency ecosystem.
The plea came as part of a deal that sees Kwon forfeiting over $19 million in illicit proceeds, including his interest in Terraform Labs and its associated cryptocurrencies. Kwon's forfeiture also includes his interest in associated tokens.
The charges against Kwon stem from allegations that he misled investors about the stability of TerraUSD, a so-called "stablecoin" designed to maintain a $1 peg, which eventually collapsed. The collapse wiped out approximately $40 billion in market value.
Kwon was extradited from Montenegro to the U.S. in late 2023 after being arrested on a false passport. His guilty plea marks a notable development, given the scale of the losses involved, and it resembles traditional fraud prosecutions despite the crypto context.
U.S. Attorney Jay Clayton has stated that Kwon's plea is an important milestone in bringing integrity and accountability to the digital asset markets.
Sentencing for Kwon is scheduled for Dec. 11, 2025. The maximum possible prison sentence for Kwon's charges is 25 years, but under the plea agreement, prosecutors will not recommend a sentence above 12 years if Kwon complies with the conditions.
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In the aftermath of the collapse of Terra's cryptocurrency ecosystem, valued at around $40 billion, Do Kwon, the co-founder who pleaded guilty, forfeited his substantial financial interests in Terraform Labs and its related cryptocurrencies. Additionally, Kwon's guilty plea, which comes amidst a digital asset market crackdown and allegations of fraud, has been hailed by U.S. Attorney Jay Clayton as a significant step towards instilling integrity and accountability in the technology-driven finance sector.
