Do Kwon, co-founder of the defunct blockchain firm Terraform Labs, has pleaded guilty to US fraud charges after a tumultuous three years following the company’s collapse.
Do Kwon, who took part in creating and developing the TerraUSD stablecoin and the Luna (now Luna Classic) token lost an estimated $40 billion in value in 2022, entered his plea during a court hearing in New York on Tuesday.
Do Kwon Admits Guilt In Conspiracy And Wire Fraud Case
Kwon faced serious allegations stemming from a nine-count indictment that included securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering, according to US authorities.
As reported by Bitcoinist on Monday, after initially pleading not guilty in January, he ultimately changed his stance, agreeing to plead guilty to two charges: conspiracy to defraud and wire fraud as part of a deal with the Manhattan US Attorney’s office.
The charges against Kwon were primarily related to misleading investors about TerraUSD, a stablecoin intended to be pegged to the US dollar. Prosecutors allege that when TerraUSD fell below its peg in May 2021, Kwon falsely assured investors that a computer algorithm known as “Terra Protocol” would restore the coin’s value.
Authorities claim that in reality, Do Kwon had “secretly arranged for” a high-frequency trading firm to buy millions of dollars’ worth of the token to artificially inflate its price and recover its value pegged to the dollar.
This behavior led both retail and institutional investors to purchase Terraform products, inflating the value of Luna—a cryptocurrency closely tied to TerraUSD—to as much as $50 billion by early 2022.
Banned From Crypto As Part Of SEC Settlement
During the court proceedings, Kwon expressed remorse for his actions, admitting, “I made false and misleading statements about why it regained its peg by failing to disclose a trading firm’s role in restoring that peg. What I did was wrong.”
As part of his legal troubles, Kwon has agreed to pay an $80 million civil fine and will be banned from engaging in crypto transactions as part of a broader $4.55 billion settlement with the US Securities and Exchange Commission.
Do Kwon, has been in custody since his extradition from Montenegro late last year by US authorities is also facing charges in South Korea on conspiring to commit commodities fraud, securities fraud, and wire fraud
Looking ahead, the crypto entrepreneur faces a potential prison sentence of up to 25 years, although prosecutors indicated they would recommend a maximum term of 12 years, contingent on Kwon accepting responsibility for his actions. Sentencing is scheduled for December 11.
Following Do Kwon’s fall, Luna Classic recorded an 8% uptick on the weekly time frame. This recovery reached the $0.00006284 level after months of continuous drops from its yearly high of $0.00012, which was reached in January.
Featured image from DALL-E, chart from TradingView.com
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