Do Kwon, co-founder of Terraform Labs – the company behind the shocking collapse of the Terra/LUNA ecosystem – is expected to change his testimony in federal court in New York today, Tuesday, August 12. This information comes after Judge Paul Engelmayer announced that the court had been notified of the intention to switch from a 'not guilty' plea to another testimony.

According to the court's order, Judge Engelmayer has requested Do Kwon to prepare a detailed report explaining all the elements constituting the charges he intends to accept.

In March 2023, Do Kwon was indicted on multiple serious charges, including: securities fraud, wire fraud, commodities fraud, conspiracy to commit fraud, market manipulation, and conspiracy to commit money laundering. These charges stem from the collapse of the algorithmic stablecoin TerraUSD (UST) and the governance token LUNA in May 2022 – a shock that wiped out tens of billions of dollars in market capitalization.

Prosecutors argue that the UST system – designed to maintain a 1:1 peg with the USD through an algorithmic mechanism linked to LUNA – completely failed, causing significant damage to global investors. After the collapse, Do Kwon fled and became an internationally wanted criminal for several months before being arrested in Montenegro for using fake identification.

Do Kwon was extradited to the U.S. in December 2024. In January 2025, he proclaimed 'not guilty' to all charges and has been held without bail since then.

According to court records, in recent months, Do Kwon's defense team and the U.S. Federal Prosecutor's Office have had 'constructive exchanges.' This change in testimony is considered a significant turning point in the case, occurring shortly after the same court brought charges against Roman Storm – co-founder of Tornado Cash.

It is important to note that this is a criminal case, separate from the civil lawsuit initiated by the U.S. Securities and Exchange Commission (SEC). In the civil case, Terraform Labs reached a settlement in 2024, agreeing to pay a fine of approximately $4.5 billion.

Market Reaction to LUNA

Prior to the news of the potential change in testimony by Do Kwon, the price of LUNA showed little volatility. At the time of writing, LUNA was trading at $0.00008, down about 1% from 24 hours earlier.

Some investors believe that if a plea agreement is reached, the case could close quickly, helping to alleviate some of the legal uncertainty. However, changing the testimony also means admitting to some responsibility, which limits the market's optimistic sentiment.