Do Kwon pleads guilty in 40bn crypto crash

In an unexpected twist, Terraform Labs co-founder Do Kwon has decided to plead guilty in federal court.

According to reports from Inner City Press, this sudden decision came after months of intense legal battles.

It is expected that on 12 August at 10:30 a.m. (US Eastern Time), Kwon will formally change his plea before Judge Paul Engelmayer. This was made clear in an order filed on 11 August. In the same document, the magistrates announced that Kwon, together with his lawyers, had decided to withdraw his previous statement of innocence.

The decision was made on terms that would have cancelled the trial date, originally set for 26 January 2026. In the first hearings, Judge Engelmayer had repeatedly encouraged both the prosecution and Kwon's defence to find a compromise, thus avoiding going to trial.

Previously, as the judge pointed out, both sides - prosecutors and defence - seemed to be leaning towards taking the case to a popular jury. Currently, Kwon faces federal charges for "perpetrating a multimillion-dollar cryptocurrency fraud scheme".

The indictment against Kwon in summary

More precisely, prosecutors allege that the Terraform Labs founder was involved in a "massive cryptocurrency fraud scheme". Kwon's fraudulent action was allegedly aimed at the collapse of the algorithmic stablecoin TerraUSD (UST).

According to the indictment, Kwon was involved in the 'sudden collapse of LUNA and UST' in May 2022. This event allegedly caused a 'systemic failure' of the two assets, with a combined loss of more than $40 billion from the cryptocurrency market, causing chain reactions throughout the crypto industry and exchange platforms.

In a separate statement, federal prosecutors called Terraform's blockchain and ecosystem 'fundamentally misleading', and Assistant U.S. Attorney Jared Lenow went so far as to describe Terraform's projects as a 'Potëmkin village'.

Lenow further explained that Terraform Labs, its products and services, were "inherently flawed and unstable".

Kwon had been absconding for almost a year, after prosecutors blamed the collapse of LUNA and UST - worth a total of 40.7 trillion won - and transferring 12.000 LUNA tokens out of South Korea before the collapse.

He was arrested in March 2023 by the Montenegro police while attempting to flee using a fake passport.

Kwon's extradition was not easy: he fought an extradition request from the US for months. However, he was eventually handed over to US authorities, allowing federal prosecutors to formalise the charges and force him to plead guilty.