New York – A former executive from South Korea, Do Kwon, has entered a guilty plea to two counts of fraud linked to a cryptocurrency collapse that wiped out over $40 billion in investor funds. Kwon, who once led Terraform Labs in Singapore, faced allegations of orchestrating misleading operations involving two cryptocurrencies, TerraUSD and Luna, which plummeted in value in 2022, influencing broader market instability.

The U.S. government has accused Kwon of overseeing a fraudulent scheme regarding the stability mechanisms of the digital currencies. As part of a plea agreement, prosecutors have indicated they will not seek a sentence exceeding 12 years, with Kwon’s sentencing scheduled for December 11.

Todd Snyder, designated by U.S. authorities to manage Terraform Labs’ bankruptcy proceedings, emphasized the significance of accountability in the cryptocurrency arena. He noted that those implicated in the downfall of the company would be held responsible, with efforts focused on recovering assets for affected investors.

Kwon’s guilty plea in a New York courtroom comes after a complex legal journey. Following an arrest warrant issued in South Korea in 2023, he evaded authorities for a period before being captured in Montenegro. Subsequently, he was extradited to the United States to face the charges.

Prosecutors detailed that Kwon misrepresented the mechanisms designed to maintain TerraUSD’s value at $1, asserting that an algorithm named Terra Protocol was responsible. They claim that, in 2021, Kwon orchestrated transactions through a trading firm to artificially bolster the stablecoin’s price, portraying an illusion of stability to entice investors.

As a result of these alleged misrepresentations, numerous investors were drawn to Terraform’s offerings, propping up the value of luna, which was intricately tied to TerraUSD. The eventual collapse of both cryptocurrencies in 2022 catalyzed significant market turmoil.

Admitting to false statements regarding TerraUSD’s value stabilization, Kwon expressed remorse during his court appearance, stating, “What I did was wrong and I want to apologize for my conduct.”

Initially, Kwon had pleaded not guilty to several charges, including securities fraud and money laundering conspiracy. If convicted on the original charges, he could have faced up to 135 years in prison. The plea deal means he will not contest the indictment’s allegations and has agreed to forfeit nearly $19.3 million, alongside several properties, as part of his restitution obligations.

While the prosecution has capped its sentence request at 12 years, Judge Paul Engelmayer retains the discretion to impose a longer sentence, potentially reaching up to 25 years. Kwon also continues to confront additional legal risks in South Korea, according to his legal representative.