South Korean cryptocurrency mogul Do Kwon pleaded guilty on Tuesday to two fraud charges arising from the $40 billion collapse of a cryptocurrency ecosystem that had promised investors their money was safe.
Kwon, 33, dubbed by some as “the cryptocurrency king,” entered the plea in Manhattan federal court.
According to a plea agreement signed by Kwon and prosecutors, the government said it will not seek a prison term of more than 12 years as long as Kwon complies with the deal’s terms, even though federal sentencing guidelines would have recommended a prison term of about 25 years. Sentencing is set for Dec. 11.
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Authorities said investors worldwide lost money in the Singapore crypto firm Terraform Labs’ $40 billion cryptocurrency crash. Kwon co-founded the company in 2018.
The May 2022 collapse came after the company claimed that TerraUSD was a reliable “stablecoin.”
What was TerraUSD?
TerraUSD was designed as a “stablecoin,” a currency that is pegged to stable assets such as the dollar to prevent drastic fluctuations in prices. However, around $40 billion in market value was erased for the holders of TerraUSD and its floating sister currency, Luna, after the stablecoin plunged far below its $1 peg.
Kwon was extradited to the United States on Dec. 31 from Montenegro after his March 23, 2023, arrest while traveling on a false passport in Europe.
As part of his plea to one count of conspiring to commit commodities fraud, securities fraud and wire fraud and a second count of wire fraud, Kwon also agreed to forfeit over $19 million, an amount that authorities said reflected ill-gotten proceeds. He’ll also lose his interest in Terraform and its cryptocurrencies.
His lawyer, Sean Hecker, said the plea meant that Kwon had accepted responsibility for making false and misleading statements to investors.
In a statement, the lawyer said his client “takes responsibility for misleading the Terra community.”
In a news release, U.S. Attorney Jay Clayton said Kwon “used the technological promise and investment euphoria around cryptocurrency to commit one of the largest frauds in history.”
He said investors around the world suffered billions of dollars in losses.