Terraform Labs co-founder Do Kwon is set to make a significant move in the ongoing US fraud case related to the collapse of the TerraUSD (UST) stablecoin in 2022. The collapse of TerraUSD wiped out a staggering $40 billion in value and had a profound impact on the cryptocurrency industry.
US District Judge Paul Engelmayer has scheduled a change of plea hearing for Do Kwon on Tuesday at 10:30 am in Manhattan federal court. The judge has directed Kwon to be prepared to provide a detailed account of how he violated the law if he chooses to plead guilty.
Do Kwon, a 33-year-old entrepreneur from South Korea, initially pleaded not guilty in January following a lengthy extradition dispute between the US and South Korea over where he would face prosecution first.
Both countries have brought charges against Kwon in connection with the collapse of TerraUSD, a Singapore-based stablecoin that was designed to maintain a 1:1 peg to the US dollar through a mint-and-burn mechanism with its sister token Luna.
The failure of this mechanism in May 2022 led to the loss of TerraUSD’s peg, causing a market crash that played a role in the downfall of the crypto exchange FTX. This collapse resulted in the loss of billions of dollars in investor wealth and shook confidence in digital asset markets.
Kwon was on the run for several months before he and Terraform’s former chief financial officer, Han Chang-joon, were apprehended in Montenegro in March 2023 while attempting to board a private jet bound for Dubai using fake passports. Kwon spent months in detention as Montenegro weighed extradition requests from the US and South Korea.
In a civil fraud case in April 2024, the US SEC successfully prosecuted Kwon and Terraform for misleading investors about the stability of TerraUSD and falsely claiming that the popular Korean payments app Chai was utilizing Terraform’s blockchain for transactions. As part of a settlement, Kwon and Terraform agreed to pay $4.47 billion and wind down operations, with Kwon personally owning 92% of the company.
In the US criminal case, Kwon faced a nine-count indictment that included securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering. Judge Engelmayer has asked Kwon’s legal team to prepare a detailed statement covering each charge he plans to admit.
The guilty plea, if accepted, could streamline proceedings in the US and potentially impact ongoing investigations in South Korea, where Kwon faces separate charges of fraud and financial misconduct under capital markets laws.
The resolution of Kwon’s case is expected to have far-reaching implications for how international crypto fraud cases are prosecuted in the future, making it a significant development in the cryptocurrency sector.