New York, 12 August 2025 – Do Kwon, co-founder of Terraform Labs, is set to receive a 12-year prison sentence after pleading guilty to conspiracy to commit fraud and wire fraud in connection with the $40 billion collapse of the Terra blockchain ecosystem. The plea agreement reduces potential exposure from a statutory maximum of 25 years to a capped sentence, with prosecutors recommending no more than 12 years if all conditions are fulfilled, as G.business reports, citing beincrypto.com.

According to court filings, Kwon’s guilty plea covers

  • Count 1: Conspiracy to commit fraud involving the Terra blockchain, Chai payments platform, Mirror Protocol, Genesis stablecoins, and the Luna Foundation Guard (LFG).
  • Count 4: Wire fraud using interstate and international communications to facilitate the scheme.

Key Terms of the Agreement

  • Payment of more than $19 million in penalties.
  • Acceptance of full responsibility for all criminal misconduct tied to Terraform Labs.
  • Waiver of any right to appeal the verdict.

Presiding Judge Paul Engelmayer has indicated that Kwon will likely serve his sentence in full before being deported to South Korea. While deportation could theoretically occur earlier, current court sentiment favors completion of the term in U.S. custody.

The plea deal marks a significant departure from a protracted trial process. Analysts note that Kwon’s cooperation with prosecutors and early admission of guilt contributed to a notably lighter sentence compared to other high-profile cryptocurrency fraud cases, such as that of Sam Bankman-Fried.

Market Context
The Terra collapse in May 2022 triggered severe liquidity shocks across the decentralized finance (DeFi) sector and led to a broader downturn in crypto asset prices. The failure of the algorithmic stablecoin TerraUSD (UST) and its sister token LUNA undermined investor confidence and accelerated regulatory scrutiny of stablecoin frameworks globally.

Sentencing remains at the discretion of the court, and Judge Engelmayer could revise the term before the final ruling. The outcome will be closely observed as a precedent for prosecuting large-scale blockchain-related fraud in U.S. federal courts.

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