Home Finance Crypto Tycoon Do Kwon Admits Guilt in $40 Billion Fraud Case Linked to Market Collapse

Crypto Tycoon Do Kwon Admits Guilt in $40 Billion Fraud Case Linked to Market Collapse

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Do Kwon, the South Korean entrepreneur behind the cryptocurrencies TerraUSD and Luna, has pleaded guilty to two charges of conspiracy to commit fraud and wire fraud in a New York federal court. This plea comes after the collapse of his cryptocurrencies in 2022, which resulted in an estimated loss of $40 billion and significantly impacted the broader market. Kwon, 33, co-founded Terraform Labs in Singapore and initially denied a nine-count indictment that included allegations of securities fraud, wire fraud, and money-laundering conspiracy.

In his guilty plea, Kwon admitted to misleading investors regarding the operation of TerraUSD, a stablecoin intended to maintain a value of $1. His admission was part of an agreement with authorities, aiming to mitigate his legal consequences. It has been suggested that he may face up to 25 years in prison; however, a deal with prosecutors could potentially limit his sentence to a maximum of 12 years, contingent on his acceptance of responsibility for his actions. Kwon has been in custody since being extradited from Montenegro last December.

Kwon is among several cryptocurrency founders facing legal challenges following the downturn in the market. Similar to him, Sam Bankman-Fried, the founder of the collapsed FTX exchange, received a 25-year prison sentence in 2024 for his role in fraud.

Allegations against Kwon include claims that he falsely assured investors in May 2021 that the “Terra Protocol” could restore the stability of TerraUSD when it fell below its dollar peg. Instead of allowing market forces to play out, prosecutors contend he engaged a high-frequency trading firm to artificially inflate the token’s value during its crisis. This deception is said to have lured many retail and institutional investors into purchasing Terra products and contributed to Luna’s valuation soaring to $50 billion by early 2022.

Kwon expressed remorse in court, conceding, “I made false and misleading statements about why it regained its peg by failing to disclose a trading firm’s role in restoring that peg. What I did was wrong.”

In addition to his legal challenges in the US, Kwon has been ordered to pay an $80 million civil fine as part of a larger settlement with the US Securities and Exchange Commission, amounting to $4.55 billion. He also faces distinct charges in South Korea. Furthermore, prosecutors indicated they would not oppose a request for Kwon to serve half of his US sentence abroad, subject to his agreement in the plea deal.

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