Do Hyeong Kwon, co-founder of Terraform Labs, pleaded guilty on Tuesday to charges of conspiracy to defraud and wire fraud in a New York federal court. This plea marks a significant development in the legal proceedings following the collapse of the TerraUSD and Luna cryptocurrencies, which resulted in an estimated $40 billion loss in 2022.
Prosecutors allege that Kwon misled investors by claiming that TerraUSD’s value was maintained through an algorithmic mechanism, while secretly employing a trading firm to artificially support its price. This misrepresentation contributed to the dramatic downfall of the cryptocurrency market in May 2022. ([reuters.com](https://www.reuters.com/legal/government/do-kwon-pleads-guilty-us-fraud-charges-40-billion-crypto-collapse-2025-08-12/?utm_source=openai))
In a 2024 settlement with the U.S. Securities and Exchange Commission, Kwon agreed to pay an $80 million civil fine and accepted a ban on crypto transactions as part of a broader $4.55 billion settlement. ([reuters.com](https://www.reuters.com/legal/government/do-kwon-plead-guilty-us-conspiracy-fraud-charges-40-billion-crypto-collapse-2025-08-12/?utm_source=openai))
Following his extradition from Montenegro, where he had been detained for using falsified travel documents, Kwon remains in custody. Sentencing is scheduled for December 11, with prosecutors recommending a sentence of up to 12 years. ([reuters.com](https://www.reuters.com/legal/government/do-kwon-pleads-guilty-us-fraud-charges-40-billion-crypto-collapse-2025-08-12/?utm_source=openai))
The collapse of TerraUSD and Luna in 2022 had a profound impact on the cryptocurrency market, leading to increased scrutiny and regulatory actions against crypto executives. Kwon’s guilty plea underscores the ongoing legal challenges facing the industry as it grapples with issues of transparency and investor protection.