- Terraform Labs founder Do Kwon may change his plea to guilty in the U.S. case over the $40B Terra-Luna collapse.
- Kwon faces nine felony charges, including fraud, market manipulation, and money laundering.
- The collapse of TerraUSD and Luna in 2022 triggered widespread crypto market failures.
- If convicted on all counts, Kwon could face up to 61 years in prison.
Terraform Labs founder Do Kwon, once at the center of one of the cryptocurrency industry’s most catastrophic implosions, may soon change his legal strategy in the U.S. case over the $40 billion Terra-Luna collapse.
Also Read: Will Do Kwon’s Hearing on April 10 Define the Future of Terra Classic?
According to Bloomberg, U.S. District Judge Paul Engelmayer has scheduled a plea change hearing for August 12 in the Southern District of New York. The hearing comes just a day after the judge warned that if Kwon intends to plead guilty, he must be prepared to detail exactly how he broke the law.
From Not Guilty to Guilty?
Kwon, extradited from Montenegro to the U.S. earlier this year, initially pleaded not guilty in January 2024. He currently faces nine felony charges, including:
- Conspiracy to defraud
- Commodities and securities fraud
- Wire fraud
- Market manipulation
- Money laundering conspiracy
Mounting legal pressure and the risk of a lengthy sentence may be pushing the 33-year-old founder to reconsider his plea in hopes of a reduced penalty.
Terra $40 Billion Collapse
At its peak in 2022, the Terra-Luna ecosystem — backed by major investors like Galaxy Digital — was valued at $40 billion. Its algorithmic stablecoin TerraUSD (UST) relied on a delicate mechanism involving its governance token LUNA to maintain a $1 peg.
That system collapsed in June 2022, sending both UST and LUNA into a death spiral. The wipeout wiped billions from the market and contributed to the collapse of multiple crypto firms, sending shockwaves across the industry.
Also Read: Terraform Labs Faces $4.47 Billion SEC Payout Over Terra (LUNC) Collapse
Potential Prison Time
If found guilty on all charges, Kwon could face up to 61 years in prison, with sentencing guidelines allowing adjustments based on the scale of losses and cooperation with authorities.
Potential maximum penalties include:
- Conspiracy to Defraud: up to 5 years per count
- Commodities Fraud: up to 7 years per count
- Wire Fraud: up to 20 years if involving financial institutions
- Securities Fraud: up to 7 years per count
- Money Laundering Conspiracy: up to 7 years per count
While the maximums are severe, defendants who cooperate or lack prior criminal records often receive reduced sentences. A guilty plea could be Kwon’s strategic move to cut legal losses and avoid an unpredictable jury verdict.
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