Do Kwon pleads guilty to the biggest crypto market crash in years
Date: 2025-08-13 Author: Oliver Abernathy Categories: BUSINESS
Terraform Labs founder Do Kwon formally pleaded guilty on August 12 to conspiracy to commit fraud and wire fraud. This happened three years after the catastrophic collapse of the Terra/Luna ecosystem and the UST stablecoin, which crashed the crypto market in 2022. Kwon initially denied all charges.
In the spring of 2022, the LUNA token, created by Terraform Labs, occupied positions in the top ten largest cryptocurrencies with a market capitalization of over $40 billion. Its success was directly related to the popularity of the UST stablecoin and the Anchor platform, which promised returns of up to 20% per annum. However, in May, UST lost its peg to the dollar, which caused a failure in the stabilization mechanism. LUNA began to rapidly decline in price, falling into a hyperinflationary spiral, and in a matter of days its price collapsed by more than 99%, falling to almost zero.
According to various estimates, the total losses of token holders and users of Terra-based projects amounted to between $40 and $60 billion. The greatest blow fell on Anchor clients, who effectively lost access to their funds. The collapse caused a chain reaction across the industry, causing prices to fall for many crypto assets and a wave of bankruptcies. Among the victims were the hedge fund Three Arrows Capital, crypto banks Celsius and Voyager Digital, as well as a number of decentralized services associated with Terra.
This crisis went down in history as one of the largest in the crypto industry. In 2024, Kwon was detained in Montenegro and extradited to the United States. At the hearing, he admitted that from 2018 to 2022, he knowingly disseminated false information about UST’s stability mechanisms, including in 2021, and engaged in international transactions to further the scheme.
As part of the plea deal, Kwon agreed to pay up to $19 million, hand over some property, and not contest key charges. The U.S. Justice Department recommended a 12-year sentence and said it would support his transfer to South Korea after serving half of his sentence. The lawyer said the businessman could face additional criminal charges in his home country.
