Written by: Oliver, Mars Finance
On August 12, 2025, Eastern Time, at the federal court in Manhattan, New York—one of the most notorious chapters in cryptocurrency history—finally reached a decisive conclusion. After more than two years of global manhunts and judicial battles, the founder of Terraform Labs (TFL), Do Kwon, who was once revered as the 'Crypto King' by countless followers, abandoned all defenses in front of the judge and pleaded guilty to multiple criminal charges, including telecommunication fraud and conspiracy to commit fraud.
'What I did was wrong,' he stated in a calm yet clear tone to the court, the prosecutors, the U.S. Securities and Exchange Commission (SEC), and the millions of victims who lost everything because of him, delivering this overdue confession.
This confession not only marked the legal conclusion of a financial storm that swept the globe, evaporating over $40 billion in market value but also served as a key to unlock the longstanding question from the outside: was this collapse an out-of-control experiment or a premeditated scam? Do Kwon's final statement personally provided the answer to the latter.
The core of the confession: the 'original sin' that was covered up
The court testimony pointed directly to the crux. Do Kwon admitted that the core of his fraudulent activities was not the collapse that ultimately destroyed everything, but an earlier, deadly lie that he meticulously covered up: in May 2021, when the UST stablecoin first faced a de-pegging crisis, he concealed the truth that the algorithm had already failed.
At that time, the algorithmic stablecoin UST, which he was so proud of, had already experienced a smaller-scale de-pegging crisis. According to his public claims, this 'perpetual motion machine' composed of code was supposed to 'self-repair.' But the reality was that the algorithm had failed.
In his confession, Do Kwon acknowledged that he did not rely on algorithms but secretly contacted a top crypto market maker with a Wall Street background—Jump Trading. The two parties reached an agreement, whereby Jump spent tens of millions of dollars to forcibly buy UST on the open market to artificially bring the price back to $1. Afterwards, Do Kwon not only did not disclose the truth but also packaged this 'rescue' as a perfect proof of the algorithm's power, attracting subsequent investments of hundreds of billions of dollars.
'I made false and misleading statements to investors regarding its (UST) stability, failing to disclose the role of a trading firm in restoring its peg.' This statement in court was the last piece of cloth he tore away to cover his shame. It was this lie, which he referred to as the 'original sin,' that drove Terra from a potentially flawed innovative project into the abyss of fraud.
The kingdom built on lies and the arrogant 'king'
With this secret weapon, Do Kwon's confidence grew. He launched a lending platform deemed a 'wealth perpetual motion machine'—Anchor Protocol, offering nearly 20% 'risk-free' annualized returns to users depositing UST. Under the grand narrative of 'crypto fundamentalism' and the temptation of ultra-high yields, global investors flocked in.
The explosive demand drove the issuance of UST to soar, and according to its algorithmic mechanism, the minting of UST required the destruction of its sister token LUNA. This directly led to LUNA's price skyrocketing, reaching $119 at the beginning of 2022, making it one of the top five by market capitalization globally.
At this point, Do Kwon had already become the top 'internet celebrity' and 'king' in the crypto world. He began to display extreme arrogance on social media, scoffing at and mocking all skeptics. When an economist pointed out the risks of his model, he responded, 'I never debate with the poor.' When someone predicted his project would collapse, he even publicly wagered millions of dollars. He once arrogantly claimed, '95% of coins will die, but watching them die is also interesting.'
Looking back now, this overwhelming arrogance was built upon the lie that he thought he could control the market forever. He seemed convinced that he was able to defy all economic laws.
The end: 72 hours of ash and smoke
Buildings built on lies will ultimately collapse.
On May 8, 2022, the weekend later dubbed 'Eclipse Night,' after one or more 'whale' accounts took advantage of the liquidity gap in decentralized exchanges to initiate a precise sell-off, the dominoes began to fall.
Panic spread instantly, and the price of UST began to detach from $1. This time, there were no secret white knights to come to the rescue. The algorithm, once revered as classic, revealed its sinister side in the face of massive selling pressure—the 'death spiral.' To raise the price of UST, the algorithm began to mint LUNA madly, with the supply of LUNA in the market skyrocketing from hundreds of millions to an astonishing 6.5 trillion within days. The massive issuance caused LUNA's price to plummet to zero, and UST also suffered the same fate.
A hundred billion empire collapsed within 72 hours.
Fleeing, trial, and the ultimate cost
After the collapse, Do Kwon embarked on a ten-month global evasion. He first claimed he would 'rebuild' Terra, then disappeared without a trace. The South Korean prosecution quickly issued an arrest warrant, and Interpol subsequently issued the highest level red notice.
Until March 2023, he was arrested while trying to board a flight using a forged passport in Montenegro. Following that, a judicial drama unfolded regarding whether to extradite him to the U.S. or South Korea. Ultimately, under the deterrent of harsher penalties in the U.S. and the strong calls from victims, he was sent on a flight to New York on December 31, 2024.
In the United States, he not only faced a staggering $4.5 billion civil settlement penalty imposed by the SEC (this fine would be paid through the liquidation of his bankrupt company TFL), but also the criminal charges that ultimately brought him to bow his head.
Do Kwon's confession put an end to the prolonged accountability for this case. The 'Terra 2.0' revival plan he created had already become a 'ghost chain' with on-chain data of less than a million dollars. His downfall also completely changed the landscape of the crypto industry. Global regulatory frameworks, such as the EU's Markets in Crypto-Assets Regulation (MiCA), which mandate that stablecoins must hold sufficient reserves, have effectively pronounced the death sentence for algorithmic stablecoin models like Terra.
From a Stanford genius to an industry leader, then to a globally wanted fugitive, and ultimately becoming a convicted prisoner bowing in court. Do Kwon's final confession is not only the end of his personal fate but also a wake-up call marking the end of an era driven by high leverage, unregulated practices, and fervent narratives in the cryptocurrency age.
