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Do Kwon, co-founder of the collapsed Terraform Labs, is set to change his plea in a New York federal court today, Tuesday, August 12. Judge Paul Engelmayer confirmed that the court had been advised of Kwon’s plan to shift from a “not guilty” plea. The judge ordered Kwon to prepare a complete narrative defense addressing all elements of the charges he now intends to admit.
Authorities charged Do Kwon in March 2023 with multiple felony counts, including securities fraud, wire fraud, commodities fraud, conspiracy to defraud, market manipulation, and money laundering conspiracy. These charges stem from the 2022 collapse of Terraform’s algorithmic stablecoin TerraUSD (UST) and its governance token LUNA. The crash wiped out billions in market value.
Collapse of TerraUSD and LUNA
Prosecutors allege that Terraform’s system, designed to keep UST’s value stable through incentives linked to LUNA, failed in May 2022. The breakdown triggered a massive sell-off, causing widespread losses for investors.
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Following the collapse, Kwon spent months evading capture. Authorities in Montenegro arrested him for using fake travel documents. In December 2024, U.S. officials secured his transfer to American custody. He pleaded not guilty to all charges in January 2025 and has remained in detention without bail.
Market Reaction
The market has shown little reaction to news of the potential plea change. LUNA traded at $0.00008 at the time of writing, down about 1% on the day. While a plea deal could reduce legal uncertainty, it also signals an admission of guilt, which may be keeping traders cautious.
Court records reveal “productive discussions” between Kwon’s legal team and the U.S. Attorney’s Office in recent months. This move follows fresh charges against Tornado Cash co-founder Roman Storm by the same court.
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This criminal case remains distinct from the SEC’s civil action. In 2024, Terraform Labs settled the SEC lawsuit by agreeing to pay about $4.5 billion in penalties.