Terraform Labs co-founder Do Kwon is expected to plead guilty in a US fraud case tied to the 2022 collapse of the TerraUSD (UST) stablecoin, which wiped out $40b in value and sent shockwaves through the cryptocurrency industry.
US District Judge Paul Engelmayer has scheduled a change of plea hearing for Tuesday 10:30 am in Manhattan federal court. In an order on Monday, the judge directed Kwon to be ready to explain in detail how he broke the law if he admits guilt.
The 33-year-old South Korean entrepreneur had pleaded not guilty in January after a prolonged extradition dispute over whether he would first be prosecuted in the US or in South Korea.
Montenegro Arrest Capped Months-Long International Manhunt
Both countries have charged Kwon in connection with the implosion of TerraUSD, a Singapore-based algorithmic stablecoin designed to maintain a one-to-one peg to the US dollar through a mint-and-burn mechanism with its sister token Luna.
That mechanism failed in May 2022, causing TerraUSD to lose its peg and triggering a market crash that contributed to the downfall of crypto exchange FTX. The collapse erased billions in investor wealth and damaged confidence in digital asset markets.
Kwon was a fugitive for months before he and Terraform’s former chief financial officer, Han Chang-joon, were arrested in Montenegro in March 2023 while attempting to board a Dubai-bound private jet using fake passports. He spent months in detention as Montenegro weighed competing extradition requests from Washington and Seoul.
Kwon’s 92% Stake Reflects Personal Ties to Firm’s Collapse
The US SEC had already won a civil fraud case against Kwon and Terraform in April 2024. Moreover, a New York jury found they misled investors about the stability of TerraUSD. The jury also concluded they falsely claimed that Chai, a popular Korean payments app, was using Terraform’s blockchain for transactions.
Under a settlement, Kwon and Terraform agreed to pay $4.47b. In addition, they committed to winding down operations. They also pledged to use remaining assets to repay creditors. Notably, Kwon personally owned 92% of the company.
In the US criminal case, Kwon had faced a nine-count indictment including securities fraud, wire fraud, commodities fraud,and conspiracy to commit money laundering. Judge Engelmayer has instructed the defendant’s legal team to prepare a detailed statement covering each charge Kwon plans to admit.
Guilty Plea Could Shape US and South Korea Prosecutions
Court documents suggest the plea deal could streamline proceedings in the US. However, it may also influence ongoing investigations in South Korea. There, Kwon faces separate fraud and financial misconduct charges under capital markets laws.
If accepted, the guilty plea would mark a dramatic turn in one of the most high-profile prosecutions in the crypto sector. It would also close a chapter on a saga that has spanned continents, courtrooms and regulatory jurisdictions.
The outcome of Kwon’s case could set important precedents for how international crypto fraud is prosecuted in the future.
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