Crypto Community Split Over Do Kwon’s $40B TerraUSD Plea
Terraform Labs co-founder Do Kwon has pleaded guilty to conspiracy and wire fraud in the $40 billion collapse of TerraUSD (UST) and its sister token LUNA. The plea covers two of nine original counts, cutting his maximum prison exposure from 135 to 25 years. Under the agreement, the DOJ will recommend a 12-year sentence and support an international transfer after Kwon serves half his term. Kwon admitted defrauding investors by falsely claiming UST’s dollar peg and hiding affiliated trading firms. He also agreed to pay up to $19.3 million in fines and forfeit assets. Sentencing is scheduled for December 11 in Manhattan.
The TerraUSD stablecoin lost its dollar peg in May 2022 after heavy withdrawals from Anchor Protocol. Attempts to stabilize the market—minting more LUNA and deploying $3 billion in Bitcoin (BTC) reserves—failed, sending TerraUSD and LUNA prices to near zero. Kwon was arrested in Montenegro in 2023 and extradited to the US in late 2024. The crypto community is split between calls for maximum prison terms and arguments that protocol failures do not equate to criminal fraud. So far, TerraUSD and LUNA have shown minimal price reaction. Creditors await details on investor compensation under the forfeiture agreement.
Neutral
This development brings legal closure to one of crypto’s largest fraud cases, but it is unlikely to significantly move TerraUSD (UST) or LUNA prices in the short term. The guilty plea and recommended sentence reduce regulatory uncertainty, which can be positive for broader market sentiment. However, since UST and LUNA tokens have been largely devalued and delisted, direct trading impact is minimal. In the long term, the case underscores heightened oversight in the stablecoin sector and may deter similar fraudulent schemes, but will not revive TerraUSD’s market value. Overall, the news is neutral for UST and LUNA prices.