2022 crypto crisis mastermind Kwon pleads guilty
A former tech executive from South Korea, Do Kwon, boss of Terraform Labs based in Singapore, accused of sparking a cryptocurrency crisis in 2022, has pleaded guilty to two criminal counts of fraud.
The crypto crisis was triggered by the collapsed of the cryptocurrencies TerraUSD and Luna in 2022, both operated by Terraform Labs, costing investors more than $40bn (£31.8bn)
The United States (US) accused him of “orchestrating a multi-billion-dollar crypto asset securities fraud”, holding Kwon responsible for the failure of the two digital currencies.
Kwon whose sentence is due on December 11, has entered a plea deal, and as a result, may not be sentenced longer than 12 years, as part of the plea bargain in New York after a long legal battle.
According to Todd Snyder, appointee of the US authorities and Terraform Labs overseeing the company’s liquidation, Kwon’s guilty plea “underscores the importance of accountability in the digital asset sector,” noting that all contributors to the collapse of Terraform Labs would be held accountable by the firm, and that assets would be recovered in the best interests of claimants.
Kwon had initially fled South Korea after a warrant was issued for his arrest in 2023, before he was arrested in Montenegro and extradited to the US.
According to US prosecutors, Kwon misrepresented features that were supposed to keep the so-called stablecoin at $1 without outside intervention, alleging that Kwon arranged for a trading firm to secretly purchase millions-of-dollars-worth of the token to restore TerraUSD’s value, after informing investors that a computer algorithm known as Terra Protocol was responsible.
This, according to prosecutors, led many investors into buying Terraform’s offerings, thereby propping up the value of the company’s Luna token closely linked to TerraUSD, with TerraUSD and Luna cryptocurrency crashing the following year.
While in court on Tuesday, Kwon confessed: “In 2021, I made false and misleading statements about why (TerraUSD) regained its peg. What I did was wrong and I want to apologize for my conduct,” though he had originally pleaded not guilty to nine counts stemming from the crash.
Based on the original indictment, he was facing up to 135 years in prison if convicted of the charges, but as part of his plea bargain to refrain from challenging the allegations in the indictment, forfeit $19.3m plus interest and several properties, and also pay restitution, prosecutors agreed to limit the sentence to 12 years, even though Judge Paul Engelmayer has maintained that he was entitled to prescribe a longer sentence.
