Do Kwon Admits to Two Core Charges, Faces Up to 25 Years in Prison

After three years of legal disputes, Do Kwon, co-founder of the defunct blockchain company Terraform Labs, pleaded guilty to fraud charges in a New York court on Tuesday.

The South Korean entrepreneur, who led the development of TerraUSD #稳定币 and #Luna tokens, is facing multiple serious charges related to the incident that caused a $40 billion market value evaporation in 2022.

According to court documents, Do Kwon initially pleaded not guilty to nine charges including securities fraud, telecom fraud, commodities fraud, and conspiracy to commit money laundering. However, after reaching an agreement with the Manhattan U.S. Attorney's Office, he ultimately admitted to two core charges: conspiracy to commit fraud and telecom fraud.

Prosecutors accused him of misleading investors through false statements, particularly when TerraUSD first depegged in May 2021, where Do Kwon claimed that the algorithmic protocol would automatically restore the peg, while concealing the fact that he secretly commissioned a high-frequency trading firm to enter the market to support the price.

In his court statements, Do Kwon openly confessed to previously providing false and misleading statements regarding the re-pegging mechanism. He also acknowledged that failing to disclose the role of the trading firm in the incident constituted a significant negligence.

This manipulation directly led to the market value of the Luna token, which was pegged to TerraUSD, soaring to $50 billion in early 2022, ultimately triggering the collapse of the entire ecosystem.

As part of the settlement agreement with the SEC, Do Kwon is required to pay an $80 million civil penalty and will be permanently banned from engaging in cryptocurrency trading. This penalty is also part of the $4.55 billion settlement agreement he reached with the SEC.

It is worth noting that this former "crypto golden boy" has been in custody since his extradition from Montenegro to the United States last year, and he is also facing charges of commodities fraud and securities fraud from South Korean authorities.

Although Do Kwon may face a maximum sentence of 25 years, prosecutors stated that if he fully accepts responsibility, they will recommend a sentence of no more than 12 years in prison, with the final verdict to be announced on December 11.

This case has become an important barometer for regulatory compliance in the cryptocurrency industry, warning project parties to maintain full transparency with investors. Meanwhile, as the trial approaches, global regulators' scrutiny of stablecoins and algorithmic financial products is expected to tighten further.