Do Kwon, co-founder of Terraform Labs, is set to appear in a New York federal courtroom today, Tuesday, August 12, where he is expected to change his plea in one of the most high-profile cryptocurrency fraud cases to date.
According to court records, U.S. District Judge Paul Engelmayer confirmed that he had been informed of Kwon’s intention and directed him to provide a full narrative defense addressing all elements of the charges.
The criminal case, filed in March 2023, centers on the spectacular collapse of Terraform Labs’ ecosystem, including the algorithmic stablecoin TerraUSD (UST) and its sister token LUNA, which together wiped out roughly $40 billion in market value in May 2022.
The Charges and Collapse of TerraUSD
Federal prosecutors have charged Kwon with securities fraud, wire fraud, commodities fraud, conspiracy to defraud, market manipulation, and money laundering conspiracy. Authorities allege that Kwon and his team misled investors about UST’s stability, which was supposed to be maintained through an algorithmic link to LUNA.
When UST lost its dollar peg, the feedback loop between the two tokens triggered a dramatic death spiral, causing the value of both to collapse within days. Millions of retail and institutional investors were left with heavy losses.
Kwon fled shortly after the crash and remained a fugitive for several months before being arrested in Montenegro in March 2023 for traveling with falsified documents.
Long Legal Battle Nearing a Critical Moment
Following months of detention overseas, Kwon was extradited to the United States in December 2024. In January 2025, he pleaded not guilty to all charges and has since been held without bail. Court filings indicate that negotiations between Kwon’s defense team and the U.S. Attorney’s Office have been “productive,” suggesting that a plea deal may be imminent.
The timing comes shortly after the same court indicted Roman Storm, co-founder of Tornado Cash, reflecting a broader U.S. crackdown on alleged criminal activity tied to blockchain projects.
Market Reaction Remains Muted
Despite the news, the market reaction has been limited. LUNA is currently trading at $0.00008, down around 1% over the past 24 hours. Analysts say that while a plea agreement could bring legal clarity, it may also dampen investor sentiment by signaling wrongdoing at the project’s core.
Separate from the criminal proceedings, Terraform Labs settled a civil lawsuit with the U.S. Securities and Exchange Commission in 2024, agreeing to pay roughly $4.5 billion in fines and disgorgement. That resolution, however, did not shield Kwon from facing criminal charges.
Implications for Crypto Regulation
Legal experts say Kwon’s plea change could have far-reaching implications for how U.S. authorities approach crypto fraud cases going forward. The Terra collapse has become a defining cautionary tale in the industry, prompting calls for stricter oversight of algorithmic stablecoins and more transparency in tokenomics.
Kwon’s decision today could mark a turning point not only for his own legal fate but also for the broader regulatory climate surrounding cryptocurrency projects in the United States.
