Do Hyeong Kwon, the co-founder of Terraform Labs, has officially admitted guilt in a $40 billion cryptocurrency fraud case, as reported by Reuters. This case has been ongoing since 2022. United States Attorney Jay Clayton announced this important update, marking a significant moment in one of the biggest failures in the crypto world.
U.S. Court Hears Kwon’s Guilty Plea
Kwon pleaded guilty in a federal court in Manhattan to several charges, including conspiracy to commit commodities fraud, securities fraud, and wire fraud. He founded Terraform Labs in 2018, promoting it as an innovative financial platform using blockchain technology to create a self-sustaining financial ecosystem.
This ecosystem featured the cryptocurrencies TerraUSD and LUNA, as well as promises of new payment services and appealing savings accounts. However, prosecutors pointed out that the main products offered by Terraform were poorly designed, which led to significant financial losses.
In May 2022, Kwon’s scheme fell apart, leading to the total loss of $40 billion in investor assets. During the crisis, Kwon allegedly took $80 million for himself, making the situation worse for many investors. At first, the co-founder denied all charges, but he later changed his position.
Terraform Founder Faces Court Verdict
Kwon likely changed his plea stance because of the strong evidence against him and the increasing pressure from investigations by U.S. and South Korean authorities. With his guilty plea, Kwon now faces the possibility of spending up to 12 years behind bars, with a 25-year sentencing likely scheduled for December 11, 2025.
Do Kwon has agreed to pay $80 million in a civil fine and will be banned from cryptocurrency transactions as part of a $4.47 billion settlement with the U.S. Securities and Exchange Commission. He has been detained since being extradited from Montenegro late last year and still faces charges in South Korea.
As part of the deal, prosecutors will not oppose Kwon’s request to be transferred abroad after he serves half of his U.S. sentence. This adds to Kwon’s complicated legal situation as he faces multiple charges in different countries.
In addition to the prison sentence, he is liable for a $19 million forfeiture, alongside asset seizures. His legal predicament echoes that of Sam Bankman-Fried, another notable figure in the cryptocurrency world who altered his plea in a high-profile fraud case. This high-profile case has shaken investor confidence and sparked calls for stronger rules to protect people from fraud in the digital currency world.
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