Terraform Labs co-founder Do Kwon has made a shocking turnaround in his legal battle with U.S. prosecutors by pleading guilty to two felony counts of wire fraud and conspiracy to defraud. This plea deal, entered in the Southern District of New York, marks a significant shift from Kwon’s previous not-guilty stance.
According to reports, prosecutors will recommend a 12-year prison sentence for Kwon, which is considerably lower than the maximum of 25 years, as long as he does not commit any new crimes before sentencing. Additionally, Kwon will face over $19 million in financial penalties, with the sentencing scheduled for December 11.
During the court proceedings, Judge Paul Engelmayer emphasized that the final decision on Kwon’s sentence rests with him. Kwon, 33, confirmed his understanding of the charges, potential penalties, and decision to waive a trial. He admitted to participating in a scheme to defraud purchasers of cryptocurrencies from Terraform Labs between 2018 and 2022.
One of the key points of the indictment involved false statements made by Kwon about how TerraUSD’s peg was restored and the involvement of another firm. The collapse of TerraUSD, an algorithmic stablecoin valued at billions of dollars, led to the two felony counts of conspiracy to defraud and wire fraud.
Kwon’s arrest in Montenegro in March 2023 for traveling with forged documents and subsequent extradition to the United States in December were part of the legal fallout from the collapse of TerraUSD. Prosecutors alleged that Kwon and his company misled investors about the stability of TerraUSD and the mechanisms supporting it.
Apart from the criminal case, the U.S. Securities and Exchange Commission (SEC) brought civil fraud charges against Kwon in February 2023, alleging violations of federal securities laws. A jury found Terraform Labs and Kwon liable for civil fraud in April this year, supporting the SEC’s claims of deceiving investors.
The plea deal outlined by Assistant U.S. Attorney Sarah Ravener includes a recommendation for a maximum sentence of 12 years if Kwon accepts responsibility and avoids further legal trouble. The agreement also includes forfeiture terms and prohibits Kwon from appealing any sentence of 25 years or less.
Kwon’s guilty plea is a significant development in the legal battle that has captured the attention of the crypto industry. The sentencing on December 11 will determine the extent of his punishment, but his admission of guilt represents a pivotal moment in the aftermath of TerraUSD’s collapse.
The case against Kwon adds to the list of major U.S. crypto fraud convictions, with comparable cases in the Southern District of New York resulting in lengthy sentences for other individuals involved in fraudulent activities in the crypto space. As Kwon awaits his fate, the repercussions of TerraUSD’s collapse continue to reverberate through global markets.