One of the most prolonged cases in the crypto world surrounding the infamous Terra has finally seen its former head accept responsibility for his crimes.
Court documents reveal the magnitude of the offences, and hopefully, this can bring some peace to the affected.
The U.S attorney for the Southern District of New York, Jay Clayton, announcedyesterday that Do Hyeong Kwon (Do Kwon) pled guilty to one count of conspiring to commit commodities, securities, and wire fraud, and one count of committing wire fraud connected to deceitful schemes at Terraform.
The platform was touted by the charged CEO as a self-contained, decentralized financial ecosystem, leveraging pioneering blockchain technology and offering a variety of financial products, including its own cryptocurrency, payment system, stock market, and savings bank.
The harsh reality was that investors and users of Terraform were unaware that none of the instruments offered functioned as intended and were manipulated to believe that everything was working optimally. Do Kwon admitted guilt before U.S. District Judge Paul A. Engelmayer.
Do Kwon used the technological promise and investment euphoria around cryptocurrency to commit one of the largest frauds in history, said Clayton.
Kwon attracted tens of billions in funds to Terraforms ecosystem by promising a self-stabilizing stablecoin. By the time the markets discovered that the ecosystem was unstable, it was too late: the system collapsed, and investors around the world suffered billions of dollars in losses.”
The allegations stated in the Superseding Indictment, along with further court proceedings and public filings, note that the company was founded in 2018. It distinguished its blockchain from others by issuing algorithmic stablecoins under the “Terra Protocol.”
According to reports, these stablecoins maintained their value regardless of changes in underlying market conditions. Around September 2020, the dollar-pegged TerraUSD (UST) was launched, and promotional materials claimed that under the protocol, one UST can always be exchanged for $1 worth of the blockchain’s native token, LUNA, and vice versa.
Over the years, the company, alongside its various entities, developed and advertised several financial products as decentralized finance applications, aimed at increasing the number of users and transactions on the Terra blockchain. Some of them include:
Do Kwon received funding from several investment firms in the United States and elsewhere, with the primary agreement being to either purchase or loan the cryptocurrencies created on the Terra blockchain. At the peak of the corporation’s growth, the co-founder who was charged became one of the most affluent leaders in the industry.
Terraform’s pinnacle was around the start of 2022, when the market cap of UST and LUNA went over $50 billion, with the majority of this expansion attributed to misrepresentations about the company and its products. By May 2022, the dollar peg of the UST had already begun to break down, a trend that had started the previous year.
They managed to cover this up in 2021, but failed to do so the following year, which led to their collapse and the loss of over $40 billion. A short time later, arrest warrants and an Interpol Red Notice were issued against the former CEO.
Around the end of March 2023, Do Kwon wascaptured in Europe while using a fake passport. Authorities from the US submitted a request for his extradition shortly after that, and there was considerable back and forth regarding where he would be charged and tried. He was deported to the United States at the end of last year.
Earlier in June, hepleaded not guilty, but eventually succumbed to the numerous charges against him. As part of his plea, he will have to forfeit $19 million in proceeds from the fraudulent schemes and will be sentenced by Judge Engelmayer on December 11, 2025.