On August 12, 2025, at the Southern District of New York Federal Court (SDNY), Do Kwon – co-founder of Terraform Labs – officially pleaded guilty to two serious criminal charges: wire fraud and conspiracy to commit fraud. This is a major turning point, ending the years-long legal battle between Kwon and U.S. prosecutors.

From 'Not Guilty' to Guilty

Initially, Kwon firmly denied all allegations related to the collapse of TerraUSD (UST) – an algorithmic stablecoin that once had a market capitalization of tens of billions of USD. However, the guilty plea agreement signed on August 12 indicates a complete change of stance.

According to the terms of the agreement:

  • Maximum sentence under the law: 25 years in prison.

  • Proposed sentence from the prosecutor: no more than 12 years, if Kwon continues to cooperate and does not commit new offenses before sentencing.

  • Fine: over 19 million USD.

  • Expected sentencing date: December 11, 2025.

  • Additional terms: asset forfeiture, no appeal if the sentence ≤ 25 years.

In court, Judge Paul Engelmayer emphasized: "The final decision on the sentence will be mine."

Kwon Admits to Deceiving Investors

When responding in court, Do Kwon admitted:

"From 2018 to 2022, I intentionally participated in a scheme to defraud cryptocurrency buyers from Terraform Labs. I misrepresented how to restore the peg of TerraUSD and the role of another company. I knew these statements were false."

Prosecutors stated that Kwon deceived investors about the stabilization mechanism of TerraUSD, especially during the crisis in May 2022 when the coin lost its $1 peg, causing widespread disaster in the market.

Consequences of the TerraUSD Collapse

The collapse of TerraUSD triggered a chain of bankruptcies and liquidity crises in the crypto industry, evaporating tens of billions of dollars in value and causing a significant drop in investor confidence. This event also became a catalyst for global regulators to tighten oversight of stablecoins and DeFi projects.

In addition to the criminal case, Kwon and Terraform Labs lost in a civil fraud case brought by the U.S. Securities and Exchange Commission (SEC). In April 2024, the jury concluded they had intentionally provided misleading information, forcing them to accept a settlement agreement worth $4.47 billion and cease operations.

The Road to Prison

After being internationally wanted, Kwon was arrested in Montenegro in March 2023 for using forged documents, and then extradited to the U.S. in late 2024. During this time, both the U.S. and South Korea requested extradition to prosecute him.

The criminal charges against Kwon could initially lead him to face a sentence of up to 130 years in prison if convicted on all counts. The new agreement significantly reduces this risk, but the official sentence still depends on the judge's decision.

Comparison with Major Cryptocurrency Cases

Do Kwon's case is compared to that of Sam Bankman-Fried – the former CEO of FTX – who was sentenced to 25 years in prison in 2024. Both are among the largest cryptocurrency fraud cases in U.S. history, causing global shock and changing how the market perceives risks from blockchain projects.

Conclusion: Do Kwon's guilty plea marks a significant milestone in the TerraUSD scandal. From the image of a 'blockchain revolutionary', he has become a warning symbol of the dangers of lack of transparency and fraud in the cryptocurrency industry. On December 11, the final sentence will reveal the level of leniency or severity of the U.S. court towards one of the largest crypto scams of the decade.