State of Crypto: Do Kwon Pleads Guilty
A few years after assuring Terra/Luna investors that their funds were safe, Terraform Labs founder Do Kwon has finally admitted to misleading them. On Tuesday, Kwon pleaded guilty to one charge of conspiring to commit fraud and one charge of wire fraud, following an earlier not guilty plea and a lengthy extradition process.
Terraform Labs was the creator of the TerraUSD stablecoin and its counterpart Luna (LUNA) token. The company's collapse in 2022 was spectacular, with Luna falling from an all-time high price of nearly $120 to less than 10 cents over the course of five weeks. UST broke its peg, and the event was the first domino in a series of crypto company bankruptcies that year.
In 2021, Do Kwon repeatedly assured investors that Terra and Luna were safe investments, through tweets and appearances on programs like CoinDesk TV. However, his statements were false and misleading, according to Kwon's guilty plea. "Between 2018 and 2022 in the Southern District of New York and elsewhere, I knowingly agreed with others to engage in a scheme to defraud, and did in fact defraud, purchasers of the cryptocurrencies issued by my company, Terraform Labs," he said.
As part of his plea deal, the Department of Justice agreed to recommend a prison sentence of no more than 12 years, and Kwon can apply for an international prison transfer once he's served 50% of his sentence. One of Kwon's attorneys noted that there are still outstanding charges against him in South Korea, the country Kwon tried to get himself extradited to during his extended stay in Montenegro.
Kwon's statement spoke to the fact that his defrauded investors were from the Republic of Korea, the Southern District of New York, and elsewhere. The case highlights the severity of the consequences for crypto executives who engage in misleading or fraudulent activities.
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Nikhilesh De is CoinDesk's managing editor for global policy and regulation, covering regulators, lawmakers and institutions. He owns < $50 in BTC and < $20 in ETH. He won a Gerald Loeb award in the beat reporting category as part of CoinDesk's blockbuster FTX coverage in 2023, and was named the Association of Cryptocurrency Journalists and Researchers' Journalist of the Year in 2020.