Do Kwon Expected to Plead Guilty Over $40 Billion Terra Collapse

Alleged crypto crook Do Kwon—who was behind the failed crypto project Terra—is now expected to plead guilty, court documents show.

A scheduling order for a potential change of plea in the United States’ case against Kwon was filed Monday ahead of the conference on Tuesday, August 12.

Kwon previously pleaded not guilty in a New York court to U.S. criminal charges including fraud over the collapse of the project, which failed in 2022, leaving a $40 billion black hole and many investors out of pocket.

Kwon founded the crypto ecosystem Terra, which had the flagship LUNA token and TerraUSD (UST) algorithmic stablecoin as its main products. 

It promised investors huge returns and many used it as a gateway into the world of decentralized finance, or DeFi. LUNA quickly became one of the most valuable crypto coins on the market, reaching a peak market cap of more than $40 billion in April 2022.

But the UST stablecoin failed to keep its stable peg to the U.S. dollar, and when it collapsed, the entire ecosystem crumbled, taking its market cap with it.

Authorities now allege that Kwon conned investors into a sham project to enrich himself, and feds in both the U.S. and Korea have hit him with criminal charges. 

Kwon is facing nine criminal charges in the U.S., including securities, wire, and commodities fraud, plus conspiracy to commit money laundering. 

The ecosystem’s collapse led to a brutal bear market as a number of top crypto projects had exposure to Terra. A number of digital asset firms offering borrowing and lending services (like BlockFi and Genesis) went bankrupt—especially following the subsequent 2022 collapse of crypto exchange FTX—in what experts dubbed “crypto contagion.” 

Crypto prices plunged in 2022 following Terra’s failure, with Bitcoin even nosediving to below $16,000 per coin at one point—nearly 80% lower than what it had traded for in 2021. But most major assets have gradually rebounded, with Bitcoin recently setting a new all-time high mark above $122,800.

Editor’s note: This story was updated with additional details after publication.