Do Kwon to plead guilty in $40B crypto collapse

Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that lost an estimated $40 billion in 2022, is planning to plead guilty on Tuesday to two charges of conspiracy to defraud and wire fraud, a judge said at a US court hearing.

US District Judge Paul Engelmayer is expected to ask Kwon, who co-founded Singapore-based Terraform Labs and developed the TerraUSD and Luna currencies, a series of questions before formally asking him to enter the plea.

Kwon, 33, had pleaded not guilty in January to a nine-count indictment charging him with securities fraud, wire fraud, commodities fraud and money laundering conspiracy.

He was accused of misleading investors in 2021 about TerraUSD, a so-called stablecoin designed to maintain a value of $1.

Kwon allegedly told investors a computer algorithm known as “Terra Protocol” had restored the coin’s value when it slipped below its peg in May 2021, when in fact he arranged for a high-frequency trading firm to secretly buy millions of dollars of the token to artificially prop up its price.

Prosecutors with the Manhattan US Attorney’s office said that false claim and others drove retail and institutional investors to buy Terraform products and boost the value of Luna, a more traditional token developed by Kwon that fluctuated in value but was closely linked to TerraUSD, to $50 billion by the spring of 2022.

Kwon had agreed in 2024 to pay an $80 million civil fine and be banned from crypto transactions as part of a $4.55 billion settlement that he and Terraform reached with the Securities and Exchange Commission.

Kwon has been detained since his extradition from Montenegro late last year. He is one of several cryptocurrency moguls to face federal charges after a slump in digital token prices in 2022 prompted the collapse of a number of companies.