A stark confession echoed through a New York courtroom on Tuesday. Do Kwon, the founder of the ill-fated Terra cryptocurrency project, admitted guilt in a significant U.S. fraud case. His admission comes three years after Terra’s spectacular collapse, which wiped out billions of dollars from the crypto market.
“What I did was wrong, and I want to apologize for my conduct,” Kwon, 33, told a federal judge. He added, “I take full responsibility.” This statement marks a major shift for Kwon. He had initially denied the charges against him. A report just Monday had hinted at his intention to plead guilty.
Kwon’s plea involves charges of conspiracy and wire fraud. This is part of an agreement with U.S. prosecutors, Bloomberg reported. As part of the deal, he also agreed to give up $19.3 million and some properties. Inner City Press, reporting separately on social media, noted Kwon told the court he would give up his right to a trial. He acknowledged he could face up to 25 years in prison.
“I knowingly agreed with others to defraud, and did defraud, buyers of cryptocurrencies issued by my company, Terraform Labs,” Kwon read from a statement.
The Fall of Terra
Kwon is best known for creating Terra. This cryptocurrency project used an algorithmic model. It had two main tokens. TerraUSD (UST) was a stablecoin. It was designed to stay pegged to the U.S. dollar. LUNA was the project’s native token. It was linked to UST. LUNA absorbed price swings through special “burning” and “minting” methods.
In May 2022, UST lost its dollar peg. Its value fell to just a few cents. At the same time, LUNA’s value plummeted. It crashed from highs around $119 to almost zero. This collapse erased nearly $45 billion from the cryptocurrency market’s value in about a week. The event caused widespread panic across the digital currency world. It dragged down big companies like FTX and led to more bankruptcies.
Terraform Labs, the company behind the project, tried to recover. It temporarily stopped its blockchain. Then, it relaunched a separate version called Terra 2.0. The old LUNA token became LUNA Classic (LUNC). However, Terraform Labs itself filed for bankruptcy in the U.S. in January 2024.
Facing Prison Time
Kwon faced charges in both South Korea and the United States for Terra’s downfall. He was extradited to the U.S. in January after spending almost two years in Montenegro. There, he had been arrested and convicted for using a false passport while fleeing authorities from his native South Korea.
Earlier this year, a U.S. court found Terraform Labs and Kwon liable for civil fraud charges. This came from a lawsuit by the U.S. Securities and Exchange Commission (SEC). After a two-week trial, a New York jury determined both defendants misled investors. Kwon had faced nine charges under the latest U.S. criminal indictment.
Sentencing is set for December 11. U.S. prosecutors have stated they will ask for a maximum sentence of 12 years under the plea agreement.
Source: Bloomberg
Source: Inner City Press
Source: Bloomberg