The courtroom drama surrounding Do Kwon, the founder of the failed Terra crypto project, is entering a new phase. According to the latest court filings, this controversial entrepreneur is expected to plead guilty on Tuesday in one of the largest scandals in cryptocurrency history.

On Monday, a motion for a possible change of plea was filed in the case United States vs. Kwon. This development suggests that Kwon – who had previously pleaded not guilty to charges in the U.S. – may now reverse his stance.

From a Billion-Dollar Empire to Total Collapse

Kwon was the driving force behind the Terra crypto ecosystem, whose flagship products were the LUNA token and the algorithmic stablecoin TerraUSD (UST). The project quickly gained popularity with promises of high yields and became the entry point for many investors into the world of decentralized finance (DeFi).

In spring 2022, LUNA ranked among the world’s most valuable cryptocurrencies, with Terra’s total market capitalization surpassing $40 billion. However, the algorithmic stablecoin UST failed to maintain its peg to the U.S. dollar. Once it lost stability, the entire ecosystem collapsed – wiping out billions in value and devastating hundreds of thousands of investors.

Fraud and Money Laundering Allegations

According to U.S. and South Korean prosecutors, Kwon deceived investors by promoting the project while knowing its sustainability was questionable. In the United States, he now faces nine criminal charges, including securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering.

The Domino Effect: Crypto Contagion

The collapse of the Terra ecosystem triggered a brutal bear market that dragged down numerous companies in the crypto industry. Firms such as BlockFi and Genesis, which were exposed to Terra-linked projects, filed for bankruptcy. The situation was further exacerbated by the subsequent collapse of the FTX crypto exchange in 2022 – an event that experts dubbed “crypto contagion.”

At its lowest point, Bitcoin fell below $16,000, representing a nearly 80% drop from its 2021 peak. However, most major cryptocurrencies have since recovered, with Bitcoin recently reaching a new all-time high above $122,800.

What’s Next?

If Kwon does plead guilty in court, it would mark a dramatic turning point in a case watched closely by the entire crypto world. A plea deal could speed up the resolution of this long-running legal battle – but the penalties awaiting him are likely to be severe.

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