TerraForm Labs founder Do Kwon has pleaded guilty to fraud charges in the United States.
Kwon admitted guilt to two counts of fraud during his latest appearance at a New York federal court. Notably, he admitted to committing wire fraud while also conspiring to perpetrate other financial fraud relating to securities and commodities.
His recent admission signals a shift from his initial claims in January, when he denied being guilty of nine charges relating to the collapse of the Terra ecosystem. Then, he faced a maximum of 135 years’ jail term if found guilty of the charges.
Kwon’s Plea Deal
However, he entered into a plea arrangement to reduce the sentence. Although he could spend 25 years in prison, the BBC reported that prosecutors have agreed not to seek a sentence longer than 12 years as part of the deal.
The deal also requires the founder of TerraForm Labs to forfeit $19.3 million plus the interest he benefited from the crime. Notably, his sentencing hearing is scheduled for later this year, by mid-December.
Terra and Kwon’s Crisis
His recent admission of guilt comes three years after the Terra project collapsed, causing investors losses to the tune of $40 billion. According to prosecutors, Kwon issued false claims about how TerraUSD (UST) maintained its peg to the dollar.
Despite initially claiming that the Terra Protocol was responsible for maintaining UST’s dollar peg, he secretly planned with a trading company in 2021 to buy huge amounts of the token to ensure it stays 1:1 to USD.
This false claim prompted many investors to purchase TFL’s products, including its ecosystem token Luna, which boosted its price. However, the project imploded the following year, causing UST to lose its peg while Luna crashed from nearly $120 to less than a cent.
Kwon went into hiding after the project collapsed. After fleeing South Korea, Interpol issued a warrant for his arrest. A few months later, Montenegro authorities arrested him and later extradited him to the United States, where he has now pleaded guilty to two counts of fraud.
In his recent court appearance, Kwon admitted to making false statements about how UST maintains its peg and subsequently apologized for his misconduct.
While Kwon could face 25 years in prison in the United States, his attorney suggested that South Korean authorities could press further charges against him once he completes his sentence.
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