Do Kwon Set for Plea Change in US Fraud Case Over TerraUSD Collapse

Highlights:

• Do Kwon is set for a plea change in a US court over the TerraUSD collapse that erased billions in investor value.
• US prosecutors and Do Kwon have discussed a plea deal that could impact related fraud charges in South Korea.
• The Terraform Labs settlement requires a payment and closure, with remaining assets used to repay creditors.

Terraform Labs co-founder Do Kwon will appear in a United States court this week to address fraud charges connected to the 2022 collapse of the TerraUSD stablecoin. US District Judge Paul Engelmayer will conduct the hearing on Tuesday in Manhattan Federal Court. The judge has instructed Kwon to provide specific details on how he breached the law in case he wishes to take a guilty plea.

DO KWON EXPECTED TO PLEAD GUILTY IN $40B TERRAUSD COLLAPSE CASE

– Terraform Labs co-founder Do Kwon is expected to plead guilty Tuesday in Manhattan federal court to U.S. fraud charges over the 2022 TerraUSD collapse that erased $40B in value, court records show.

– According to… pic.twitter.com/EYF3JKBTEx

— BSCN (@BSCNews) August 12, 2025

Kwon previously pleaded not guilty in January following an extended dispute over whether the United States or South Korea would prosecute him first. Authorities in both countries have charged him over the downfall of TerraUSD. The stablecoin was designed to keep a one-to-one value with the US dollar. Furthermore, it used a mint-and-burn system linked to its sister token, Luna. That system failed in May 2022, causing TerraUSD to lose its peg and triggering a market downturn that also impacted the collapse of cryptocurrency exchange FTX.

After the failure, Kwon spent months evading capture. Authorities arrested him in Montenegro with former Terraform CFO Han Chang-joon. They were preparing to travel to Dubai on a private jet using false passports. Kwon remained in detention as Montenegro considered competing extradition requests from Washington and Seoul.

Do Kwon Set for Plea Change in US Fraud Charges

The United States Securities and Exchange Commission won a civil fraud case against Kwon and Terraform in April 2024. The New York jury ruled that Kwon had lied to investors about TerraUSD’s stability. They also found he made false claims about Chai, a popular South Korean payments app. Moreover, they concluded he lied about the app using the Terraform blockchain to send payments.

As a settlement, Kwon and Terraform were to pay $4.47 billion, close down their business, and utilize available funds to settle creditors. According to court records, Kwon was the owner of 92% of Terraform Labs, making his position important in the failure of the company. US prosecutors charged Kwon with nine counts of securities fraud, commodities fraud, wire fraud, and conspiracy to commit a money laundering offense.

Kwon’s extradition to the United States followed over a year of legal battles in Montenegro. His arrest and subsequent legal actions have drawn international attention because of the scale of losses and the cross-border nature of the case.

South Korea Charges Could Be Affected by US Proceedings

A guilty plea in the United States may accelerate court procedures and influence investigations in South Korea. Kwon is facing fraud and financial crimes under capital markets laws in South Korea. The plea hearing is scheduled less than a week after the court ruled against Roman Storm, co-founder of Tornado Cash. In that case, the court found him guilty of running an unlicensed money-transmitting business. Storm now awaits sentencing.

Roman Storm, co-founder of Tornado Cash, was found guilty of conspiracy to operate an unlicensed money transmitting business but acquitted on sanctions violation charges.

The jury in Manhattan convicted Storm on the money transmitting charge, highlighting concerns over… pic.twitter.com/joH2vboeVO

— UseTheBitcoin 🚀🌕 (@usethebitcoin) August 11, 2025

Before the court set the plea hearing, it had scheduled Kwon’s criminal trial in the U.S. for January 2026. However, ongoing plea deal talks may alter that date. For months, his legal team and federal prosecutors have held discussions about a possible agreement.