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Terraform Labs Cofounder Do Kwon Set to Change Plea in $40 Billion UST Collapse Case

Terraform Labs Cofounder Do Kwon Set to Change Plea in $40 Billion UST Collapse Case

DeFi Planet2025/08/12 13:30
By: DeFi Planet
UST0.00%LUNA-3.92%
Do Kwon, co-founder of Terraform Labs, is preparing to change his plea in the high-profile U.S. criminal case related to the 2022 collapse of the TerraUSD (UST) stablecoin that wiped out approximately $40 billion in investor value.

Do Kwon, co-founder of Terraform Labs, is preparing to change his plea in the high-profile U.S. criminal case related to the 2022 collapse of the TerraUSD (UST) stablecoin that wiped out approximately $40 billion in investor value.

A federal judge in the Southern District of New York scheduled a hearing for August 12, 2025, where Kwon may formally enter a guilty plea after previously pleading not guilty to nine felony counts, including securities fraud, market manipulation, wire fraud, and money laundering conspiracy.

Terraform Labs Cofounder Do Kwon Set to Change Plea in $40 Billion UST Collapse Case image 0 source: Google

The charges revolve around allegations that Kwon orchestrated a fraudulent scheme involving Terra’s algorithmic stablecoin, UST, and its sister token, Luna. The tokens were designed to maintain UST’s peg to the U.S. dollar through an automated mint-and-burn mechanism. However, in May 2022, this mechanism failed, causing a catastrophic de-pegging and collapse of both tokens, which triggered a ripple effect throughout the cryptocurrency market and led to the bankruptcy of several platforms, including the prominent crypto exchange FTX .

Despite his initial resistance in court and efforts to avoid extradition from Montenegro—where he was arrested after attempting to travel with falsified documents—Kwon was extradited to the U.S. in late 2024 and has been held without bail since his arrival. The upcoming hearing will require Kwon to provide a narrative allocution, outlining the facts of the crimes he intends to admit, signaling a possible agreement with prosecutors in what has been a prolonged legal battle.

This development may represent a critical precedent in how the U.S. legal system prosecutes cryptocurrency founders and executives accused of fraudulent activity. Terraform Labs reached a separate settlement with the U.S. Securities and Exchange Commission (SEC) in 2024, agreeing to pay over $4.5 billion in fines and penalties while winding down its operations to compensate victims.

The case continues to attract significant attention from regulatory authorities and the crypto community alike, as it highlights increasing efforts to enforce accountability in the decentralized finance (DeFi) sector. 

 

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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