Terraform Labs collapse
Crypto fugitive :A South Korean former tech executive accused of helping to spark a cryptocurrency crisis that cost investors more than $40bn (£31.8bn) has pleaded guilty to two criminal counts of fraud.
Guilty Plea in US Court
Do Kwon’s Admission
Do Kwon, the former boss of Singapore-based Terraform Labs, which operated the cryptocurrencies TerraUSD and Luna, admitted guilt in a New York court on Tuesday, August 12, 2025.
The plea follows a lengthy legal battle stemming from the collapse of both digital currencies in 2022, which triggered a broader sell-off in the crypto market.
Kwon acknowledged making “false and misleading statements” about TerraUSD’s stability in 2021, stating, “What I did was wrong and I want to apologise for my conduct.”
Plea Deal Terms
As part of the plea deal, US prosecutors have agreed not to seek a sentence longer than 12 years for Kwon, who faces sentencing on December 11, 2025. However, Judge Paul Engelmayer noted that he retains the authority to impose a sentence of up to 25 years.
Kwon also agreed to forfeit up to $19.3m plus interest, several properties, and pay restitution, while refraining from challenging the allegations in the original indictment.
Fraud Allegations
Misrepresentation of TerraUSD
US prosecutors accused Kwon of orchestrating a multi-billion dollar crypto asset securities fraud. They alleged that in 2021, he misrepresented the features of TerraUSD, a so-called stablecoin designed to maintain a $1 value without external intervention.
Instead of relying solely on a computer algorithm called Terra Protocol, as Kwon claimed to investors, he arranged for a trading firm to secretly purchase millions of dollars’ worth of the token to artificially restore its value.
Impact on Luna and Investors
This misrepresentation encouraged a wide range of investors to buy Terraform Labs’ offerings, inflating the value of the company’s Luna token, which was closely tied to TerraUSD.
The subsequent collapse of both TerraUSD and Luna in 2022 wiped out billions in investor wealth, destabilizing the broader cryptocurrency market.
Legal Battle and Extradition
Flight from Justice
Kwon’s guilty plea marks the end of a dramatic legal saga. After South Korea issued a warrant for his arrest in 2023, Kwon fled the country, eventually being apprehended in Montenegro.
He was jailed there before his extradition to the US to face charges. Initially, Kwon pleaded not guilty to nine counts, including securities fraud, wire fraud, and money laundering conspiracy, which carried a potential sentence of up to 135 years if convicted.
Ongoing Charges in South Korea
According to Kwon’s attorney, he still faces charges in South Korea related to the Terraform Labs collapse, indicating that his legal troubles may not be fully resolved despite the US plea deal.
Industry Accountability
Liquidation Oversight
Todd Snyder, appointed by US authorities and Terraform Labs to oversee the company’s liquidation, emphasized the significance of Kwon’s plea. “Kwon’s guilty plea underscores the importance of accountability in the digital asset sector,” Snyder said.
He added that those responsible for Terraform Labs’ collapse will face consequences, and efforts are underway to recover assets in the best interests of claimants.
Broader Implications
The case highlights the risks and regulatory challenges in the cryptocurrency industry, particularly around stablecoins, which are marketed as stable but can be vulnerable to manipulation.
Kwon’s actions and the subsequent market crash have fueled calls for stricter oversight of digital assets to protect investors.
Source: This article is based on a report published by BBC News on August 12, 2025. Read the original at BBC News. Additional context was drawn from posts on X discussing the Terraform Labs fraud case.
