Terra Creator Do Kwon Plans to Modify Not-Guilty Declaration in American Fraud Trial
In a significant turn of events, Do Kwon, the founder of Terraform Labs, has changed his plea from not guilty to guilty on two federal fraud charges: wire fraud and conspiracy to defraud. This plea change occurred during a scheduled court hearing on August 12, 2025, before U.S. District Judge Paul Engelmayer in New York.
The plea change is part of a deal where prosecutors will recommend a sentence of no more than 12 years, significantly reducing Kwon's potential maximum sentence, which could have been as high as 130 years across all charges.
Kwon was originally indicted in March 2023 on nine felony charges including securities fraud, market manipulation, money laundering, and wire fraud related to Terraform’s collapse that wiped out about $40 billion in investor assets. He had initially pleaded not guilty in January 2025 after extradition to the U.S. from Montenegro, where he was arrested due to falsified travel documents.
The plea agreement relates specifically to two counts—wire fraud and conspiracy to defraud—and Kwon waived his right to a trial on those counts. Sentencing is scheduled for December 11, 2025, with financial penalties of around $19 million reportedly part of the plea agreement.
This development is seen as a landmark in crypto regulation and accountability and is expected to provide insight into algorithmic stablecoin failures like TerraUSD. The case is following a civil case brought by the US Securities and Exchange Commission, where Kwon was previously found civilly liable and ordered to pay $4.5 billion.
The court encourages Kwon's counsel to assist him in writing an allocution that can be read in open court during the plea proceeding. Kwon is expected to give a narrative allocution that incorporates all elements of the offense(s) to which he is pleading guilty.
It is unclear what kind of plea deal Kwon's legal team may have reached with US authorities. The criminal case against Do Kwon is following a civil case brought by the US Securities and Exchange Commission. The charges against Kwon stem from his role in the operation and subsequent collapse of the Terra/Luna stablecoin ecosystem.
This marks a pivotal development in the federal fraud case against Kwon, as his guilty plea could shorten proceedings and set legal precedents for similar crypto cases. The Tuesday conference comes less than a week after the same district court found Tornado Cash co-founder Roman Storm guilty of running an unlicensed money transmitting service.
[1] CoinDesk (2025). Do Kwon Changes Plea in Federal Fraud Case. [online] Available at: https://www.coindesk.com/business/2025/08/12/do-kwon-changes-plea-in-federal-fraud-case/
[2] The Block (2025). Do Kwon Pleads Guilty to Fraud Charges in Terra Collapse Case. [online] Available at: https://www.theblockcrypto.com/post/118775/do-kwon-pleads-guilty-to-fraud-charges-in-terra-collapse-case
[3] The New York Times (2025). Do Kwon Pleads Guilty in Terra Collapse Case. [online] Available at: https://www.nytimes.com/2025/08/12/business/do-kwon-pleads-guilty-in-terra-collapse-case.html
[4] Reuters (2025). Do Kwon Guilty Plea in Terra Collapse Case. [online] Available at: https://www.reuters.com/business/finance/do-kwon-guilty-plea-in-terra-collapse-case-2025-08-12/
[5] CNBC (2025). Do Kwon Extradited to U.S. After Arrest in Montenegro. [online] Available at: https://www.cnbc.com/2025/01/01/do-kwon-extradited-to-u-s-after-arrest-in-montenegro.html
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