Kwon, accused of being responsible for the $40 billion crash of Terra, prepares to admit guilt.
In a significant turn of events, Do Kwon, co-founder of Terraform Labs and creator of the Terra/Luna stablecoin ecosystem, has pleaded guilty to two fraud charges tied to the collapse of Terra. This marks the largest failure in crypto history, resulting in about $40 billion in losses.
The guilty plea was announced in a New York court, with Kwon agreeing to forfeit $19 million as part of a plea deal. This legal turning point comes after Kwon initially pleaded not guilty and was extradited to the U.S. from Montenegro at the end of 2024.
The Terra ecosystem, which included the LUNA token and TerraUSD (UST) algorithmic stablecoin, plunged in 2022 following its failure. The TerraUSD stablecoin failed to maintain its stable peg to the U.S. dollar, leading to its collapse and the subsequent brutal bear market in the crypto market.
The case was overseen by Judge Paul Engelmayer in the Southern District of New York. Kwon’s legal team had indicated a plea change in August 2025, signaling possible cooperation and expediting sentencing. The U.S. Securities and Exchange Commission and other regulators had charged Kwon and Terraform Labs with orchestrating a multi-billion dollar securities fraud by misleading investors about the Terra stablecoins' stability and business use. U.S. courts found Kwon liable for fraud in April 2024 prior to his plea.
The broader impact on the crypto market includes increased regulatory scrutiny on stablecoins and crypto fraud, and numerous class-action lawsuits by investors in South Korea, the U.S., and Singapore. The collapse significantly damaged trust in algorithmic stablecoins and highlighted risks in crypto securities, influencing regulatory approaches globally.
This development in the Terra case is expected to contribute to a stricter regulatory environment in the crypto markets. For more updates on this and other tech news, subscribe to our Daily Debrief Newsletter, available on Walrus.
- The guilty plea by Do Kwon, creator of the Terra/Luna stablecoin ecosystem, has forfeited him $19 million as part of a plea deal, announced in a New York court.
- Kwon's legal team signaled a plea change in August 2025, indicating possible cooperation and expediting sentencing.
- The Terra issues have led to increased regulatory scrutiny on digital assets and crypto fraud, influencing regulatory approaches globally.
- The Terra ecosystem, which includes the LUNA token and TerraUSD (UST) algorithmic stablecoin, plunged in 2022 after its failure.
- The collapse of the TerraUSD stablecoin has significantly damaged trust in algorithmic stablecoins and highlighted risks in crypto securities investments.
- The broader impacts on the crypto market include numerous class-action lawsuits by investors in South Korea, the U.S., and Singapore.
- The widespread fraud allegations against Kwon and Terraform Labs involve misleading investors about the Terra stablecoins' stability and business use.
- Subscribe to our Daily Debrief Newsletter for updates on the Terra case and other tech news, available on Walrus, as this development is expected to contribute to a stricter regulatory environment in the crypto markets. This case also falls under the category of general-news and crime-and-justice.
