Terra’s Do Kwon to Face 25 Year Sentence For Fraud In $40B LUNA Collapse

Do Kwon, co-founder of Terraform Labs, pleaded guilty to two U.S. criminal charges over the collapse of TerraUSD and Luna, back in mid-2022. This collapse led to a massive $40 billion erosion of investors’ wealth, leading to a crypto market downturn back then. As per the hearing details, Kwon is likely ot face a penalty of nearly 25 years.

Do Kwon Faces Prison After Admitting Role in $40B Crypto Collapse

Reuters revealed that the plea was confirmed by U.S. District Judge Paul Engelmayer during a Manhattan court hearing. It involves conspiracy to defraud and wire fraud.

The agreement prohibits him from filing an appeal in case he is sentenced to 25 years or less, as prosecutors said. The arrangement further provides that, in case Kwon expresses remorse and does not engage in any new offenses, then the government will intervene so that any jail sentence should last no more than 12 years.

Judge Paul Engelmayer, who presided in a court hearing, agreed. He asked Kwon whether he had signed the forfeiture agreement and Kwon confirmed. The judge inquired whether he was willing to accept not challenging the factual claims in the indictment. Kwon replied with a nod saying, “I am, your honor.”

His guilty plea will assist in saving him from a lengthy trial, which was previously scheduled to take place in January 2026. They have not set the date to be sentenced, and charges may result in a long jail stay.

Kwon, 33, had previously denied all charges in a nine-count indictment. These included securities fraud, commodities fraud, and money laundering conspiracy.

Meanwhile, the trial involving Roman Storm, another crypto-related executive, isn’t concluded yet. The jury failed to reach a verdict on two charges involving him.

The case stems from the 2022 implosion of TerraUSD, a so-called algorithmic stablecoin designed to hold a $1 value. According to Reuters, prosecutors allege Kwon misled investors in 2021 by claiming the coin’s stability was restored through an automated protocol.

The truth was it was being propped up by a secret deal with a high-frequency trading firm. This artificial manipulation supposedly encouraged more investments, causing the total valuation of Luna to be $50 billion as of April 2022.

Guilty Plea Concludes One of Crypto’s Biggest Frauds

As TerraUSD failed to maintain its peg in May 2022, the related Luna token (LUNC) also crashed to zero with investors losing an estimated $40 billion of value in the process. Currently, LUNC price is $0.00006147 as it is down 0.38% in the last 24 hours.

The crash spread through the cryptocurrency world. It was a leading cause of the series of bankruptcies, attracting regulatory attention throughout the world.

Kwon agreed to pay the U.S Securities and Exchange Commission $4.55 billion in settlement of the case in 2024. He agreed to pay an $80 million civil fine and accept a ban on crypto transactions.

He has been in custody since his extradition from Montenegro. There, he served a sentence for document forgery after being arrested with fake travel papers.

The case is a striking contrast to a formerly celebrated blockchain star whose initiative was identified as the success story of decentralized finance. The announcement has drawn strong reactions within the crypto community.

When a previous report revealed that he may plead guilty, Bloomberg analyst James Seyffart commented. He said the move signals that there would be no trial for Luna/Terra and Do Kwon.