Do Kwon may plead guilty in US case over US$40 billion Terraform collapse

[NEW YORK] Terraform Labs co-founder Do Kwon may plead guilty in a US fraud case tied to the US$40 billion collapse of the TerraUSD stablecoin in 2022.

US District judge Paul Engelmayer in New York scheduled a change of plea hearing for Tuesday (Aug 12). The judge said in an order on Monday that Kwon should be ready to explain how he violated the law if he pleads guilty.

Kwon, 33, pleaded not guilty in January following a two-year extradition battle over whether he would first face prosecution in the US or his native South Korea. A call to Kwon’s lawyer was not immediately returned.

Kwon was charged in both countries in connection with the implosion of Singapore-based Terraform’s TerraUSD, which shook the crypto world in the spring of 2022. The downturn that followed played a role in the collapse of cryptocurrency exchange FTX.

Kwon had been a fugitive from South Korean charges for months when he and Terraform’s former chief financial officer were caught trying to board a Dubai-bound private jet at the airport in Montenegro’s capital, Podgorica, with fake passports in March 2023.

Kwon, who owned 92 per cent of Terraform, was held in Montenegro for months as officials in the Balkan nation spent most of two years battling over whether he should be extradited to the US or South Korea.

Meanwhile, Terraform and Kwon were found liable for civil fraud in a 2024 suit by the US Securities and Exchange Commission. A jury in New York, at the end of a two-week trial, determined that Kwon and Terraform misled investors.

Jurors found that Terraform and Kwon falsely claimed that Chai, a popular Korean payment application, was using Terraform’s blockchain technology to make transactions. The jurors also found investors were misled about the stability of the UST stablecoin, which Kwon and Terraform claimed was algorithmically pegged to the US dollar.

Terraform and Kwon later agreed to pay the US US$4.47 billion to resolve the case. The deal required Kwon to wind down the business and use any remaining assets to pay off the company’s creditors. BLOOMBERG