Nikolas Sargeant
Terraform Labs co-founder Do Kwon has dramatically reversed course in his legal battle with U.S. prosecutors, changing his plea from not guilty to guilty on two felony counts of wire fraud and conspiracy to defraud. The plea change occurred Tuesday at the U.S. District Court in the Southern District of New York, where Kwon waived his right to trial on two of the nine charges he faces related to the spectacular collapse of the Terra ecosystem in 2022.
Under the reported plea agreement with federal prosecutors, Kwon faces $19 million in financial penalties and could receive up to 12 years in prison, significantly less than the maximum 25-year sentence the charges could carry if served consecutively. The agreement stipulates that prosecutors will not recommend more than 12 years at sentencing, though Judge Jed Engelmayer emphasized that the final decision rests with the court. Kwon's sentencing hearing is scheduled for December 11.
The guilty plea represents a major development in one of the crypto industry's most high-profile criminal cases. Kwon was originally indicted in March 2023 on nine charges including securities fraud, market manipulation, money laundering, and wire fraud following the Terra Luna and TerraUSD stablecoin collapse that wiped out approximately $60 billion in market value. He had pleaded not guilty to all charges when he first appeared in the New York courtroom in January after his extradition from Montenegro.
The timing of Kwon's plea change remains unclear, coming seven months after his initial not guilty plea and ahead of a trial that was scheduled for January 2026. His case adds to a growing list of crypto executives facing serious criminal penalties in the Southern District of New York, following the 25-year prison sentence handed down to former FTX CEO Sam Bankman-Fried in 2024 and the recent conviction of Tornado Cash co-founder Roman Storm.
Background: From Fugitive to Federal Custody
Kwon's path to the federal courthouse began with his dramatic fall from grace following the Terra ecosystem's collapse in May 2022. After the crash wiped out billions in investor funds, Kwon became one of the crypto world's most wanted fugitives, with his whereabouts unknown for months. Montenegrin authorities eventually arrested him for using falsified travel documents, leading to a complex four-month extradition battle between U.S. and South Korean officials.
The criminal charges represent just one aspect of Kwon's legal troubles. Earlier this year, Terraform Labs and Kwon agreed to a separate billion-dollar settlement with the SEC to resolve civil fraud charges related to the Terra collapse. This latest guilty plea on criminal charges significantly escalates the consequences he faces, with potential prison time now looming alongside the massive financial penalties.
