Terraform Labs founder Do Kwon pleads guilty to fraud over $40 billion crypto collapse
Terraform co-founder Do Kwon has pleaded guilty to two US chargers of fraud after his actions wiped out $40 billion worth of crypto investments, The Guardian reported. Kwon's story is a wild one involving an immense crypto crash, an Interpol manhunt and Kwon's eventual extradition from Montenegro to the United States.
Kwon, along with Sam Bankman-Fried and others, was a key player in 2022's crypto collapse. His company Terraform created a "stablecoin" called TerraUSD supposedly pegged to the US dollar, along with a floating crypto coin called Luna. When TerraUSD fell below its $1 peg in May of 2021, Kwon secretly arranged for a trading firm to buy the currency to boost its price. However, he lied to investors and said he stabilized the coin using a specialized algorithm.
Those investors believed the story and bought up Luna (closely tied to TerraUSD), to the tune of nearly $50 billion, according to US prosecutors. Both currencies subsequently collapsed, taking $40 billion of investor money with it. As it often works with such things, many regular people lost their life savings, while venture capital firms profited before the rug was pulled.
Following the collapse, Kwon was put on wanted lists in both the US and South Korea, with investigators in the latter country enlisting Interpol to find the entrepreneur. He subsequently posted on X that he "wasn't on the run" and was extradited to the US last year on New Year's Eve.
Kwon was originally charged with nine counts including securities fraud, wire fraud, commodities fraud and money-laundering conspiracy. Though facing up to 25 years, he may receive a reduced sentence of 12 years maximum provided he accepts responsibility for his crimes. "I made false and misleading statements about why [TerraUSD] regained its peg by failing to disclose a trading firm’s role in restoring that peg,” Kwon said. “What I did was wrong.”
Earlier, Kwon agreed to pay an $80 million civil fine and be banned from crypto transactions as part of a $4.55 billion US Securities and Exchange Commission settlement. Prosecutors will allow Kwon to be transferred to South Korea after half his US sentence is served. This article originally appeared on Engadget at https://www.engadget.com/general/terraform-labs-founder-do-kwon-pleads-guilty-to-fraud-over-40-billion-crypto-collapse-134009107.html?src=rss
