TerraForm Labs’ founder, Do Kwon, has pleaded guilty to two counts of fraud during his latest appearance in a New York federal court. He admitted to committing wire fraud and conspiring to carry out other financial crimes involving securities and commodities.

Shift from Earlier Denial

This confession marks a significant shift from his January stance. At the time, Kwon denied nine charges tied to the collapse of the Terra ecosystem. Back then, he risked up to 135 years in prison if convicted.

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However, Do Kwon reached a plea deal with prosecutors. Under the agreement, he faces a maximum of 25 years in prison. Yet, prosecutors have agreed not to seek more than 12 years. As part of the deal, he must also forfeit $19.3 million plus interest earned from the crime. His sentencing hearing will take place by mid-December this year.

Background on Terra Collapse

Kwon’s guilty plea comes three years after Terra’s $40 billion crash, which wiped out investor funds. Prosecutors revealed that he issued false claims about how TerraUSD (UST) maintained its peg to the US dollar. In 2021, Kwon secretly arranged with a trading firm to purchase massive amounts of UST. 

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This move propped up the token’s value at $1, even though he publicly claimed the Terra Protocol handled the peg. These statements convinced many investors to buy into Terra’s products, including Luna. The token’s price surged until the project collapsed in 2022, sending UST off its peg and Luna plunging from nearly $120 to less than a cent.

Following the crash, Kwon fled South Korea. Interpol issued a warrant for his arrest. Authorities in Montenegro eventually captured him and extradited him to the United States.

In court, Kwon admitted to making false statements about UST’s peg and apologized for his actions. While he faces up to 25 years in the US, his lawyer noted that South Korean prosecutors could bring additional charges after he serves his sentence.

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