Do Kwon pleaded guilty to federal fraud in Manhattan court, with sentencing expected on December 11.

According to Inner City Press reporting on August 12, Kwon admitted to orchestrating a cryptocurrency scheme that prosecutors allege caused over $40 billion in damages when the LUNA token and TerraUSD collapsed in May 2022.

His defense attorney pleaded guilty to conspiracy to commit fraud and money laundering before Judge Paul Engelmayer in the Southern District of New York (SDNY).

Kwon admitted to making misleading statements about Terra's operations and acknowledged that his statements had misled investors.

He told the court:

"From 2018 to 2022 at SDNY and elsewhere, I knowingly agreed to participate in a scheme to defraud cryptocurrency buyers from my company Terraform Labs. I lied about how to restore the exchange rate and the role of another company. I knew my statements were false."

The plea agreement stipulates a financial penalty exceeding $19 million and establishes sentencing guidelines of up to 25 years in prison. Prosecutors agreed to recommend a sentence of no more than 12 years if Kwon takes responsibility and commits no further crimes.

These charges carry a maximum statutory sentence of 25 years in prison, with the conspiracy charge carrying a sentence of 5 years and the money laundering charge carrying a sentence of 20 years.

Judge Engelmayer is expected to announce the sentence at 11 a.m. on December 11, when Kwon will learn his final prison sentence for the Terra ecosystem fraud.

The Collapse of the Terra Ecosystem and Its Impact on the Market

FatMan, a prominent figure in the investigations following the Terra collapse, commented on the guilty outcome:

"Do Kwon's guilty plea means he is likely facing 15 to 20 years in prison instead of the maximum statutory sentence of 25 years. Prosecutors will recommend a 12-year sentence. This is a vindication after many years of work. But make no mistake - Do Kwon is also becoming a scapegoat for Jump [Crypto] and Kanav Kariya [former president of Jump Crypto]."

Prosecutors allege that Terraform's products were unstable and needed continuous adjustments to maintain market value and stability.

The collapse in May 2022 sent shockwaves across the cryptocurrency market, contributing to a broader wave of selling digital assets that caused hundreds of billions of dollars in market capitalization to evaporate.

Kwon was arrested after nearly a year on the run following the collapse of Terra. Montenegrin authorities detained him in March 2023 as he was attempting to travel on forged passport documents.

After being arrested, Kwon struggled with extradition procedures before ultimately being transferred to U.S. custody.