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  • bitcoinBitcoin (BTC) $ 42,977.00 0.18%
    ethereumEthereum (ETH) $ 2,365.53 1.12%
    tetherTether (USDT) $ 1.00 0.2%
    bnbBNB (BNB) $ 302.66 0.19%
    solanaSolana (SOL) $ 95.44 1.28%
    xrpXRP (XRP) $ 0.501444 0.1%
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image-alt-1BTC Dominance: 58.93%
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Do Kwon to Change 'Not Guilty'

Do Kwon to Change ‘Not Guilty’ Plea in Terraform Labs Fraud Case Update

https://icn.live/wp-content/uploads/2025/08/Do-Kwon-to-Change-Not-Guilty.mp3
  • by ICN.live
Adnan Al-Jaziri

Do Kwon to change ‘Not Guilty’ Plea has become the focal point in the ongoing Terraform Labs legal saga.

The founder of the now-collapsed Terra/Luna stablecoin network is expected to appear in a New York courtroom Tuesday morning, where he may reverse his previous plea. U.S. District Judge Paul Engelmayer issued an order Monday indicating he had been advised of the possible plea change, sparking speculation about whether Kwon will accept a plea agreement with prosecutors.

Kwon had initially pleaded not guilty in January to multiple federal charges, including securities fraud, market manipulation, wire fraud, and money laundering. These charges are tied to the catastrophic collapse of the TerraUSD (UST) stablecoin in May 2022, which erased over $40 billion in market value and shook confidence in the broader cryptocurrency market.

Hearing Could Signal Strategic Shift

If Kwon changes his plea, it could signal a major strategic shift by the defense. Court documents suggest the judge expects a detailed narrative allocution — a formal admission in court describing actions that meet all elements of the offense. This is typically required in plea agreements, ensuring the defendant accepts responsibility.

Kwon’s legal troubles extend beyond criminal charges. In a separate civil case brought by the U.S. Securities and Exchange Commission, Kwon and Terraform Labs were found liable for fraud earlier this year. They were ordered to pay $4.5 billion in penalties and disgorgement.

ANOTHER MUST-READ ON ICN.LIVE: ICN.live Key Opinion | EXCLUSIVE Interview with Gracy Chen, CEO at Bitget

Do Kwon to Change ‘Not Guilty’ Plea Amid Global Legal Pressures

Kwon’s appearance in court follows his extradition from Montenegro at the end of 2024, where he was detained for attempting to travel with falsified documents. His extradition concluded a months-long legal tug-of-war between Montenegrin authorities and the U.S.

Prosecutors had previously indicated they needed to review six terabytes of evidence during discovery, which had pushed a tentative trial date to next January. Monday’s court order did not confirm whether a full guilty plea will be entered or if the agreement will address only specific charges.

Terra/Luna Collapse Remains One of Crypto’s Largest Disasters

The Terra/Luna collapse began when TerraUSD, an algorithmic stablecoin meant to maintain a $1 peg, lost its stability. Its sister token, Luna, plummeted in value within days. The collapse wiped out investor portfolios worldwide and became a case study in the risks of algorithmic stablecoins. The event also intensified calls from lawmakers and regulators for stricter oversight in the crypto sector.

If Kwon accepts a plea deal, it may conclude one of the most significant fraud prosecutions in cryptocurrency history, though the broader market impact of Terra’s failure will likely remain a cautionary tale for years to come.

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Why is Do Kwon considering changing his plea?

Do Kwon’s potential plea change likely stems from ongoing negotiations between his defense team and federal prosecutors. Accepting a plea deal can sometimes result in reduced charges or sentencing, especially in complex fraud cases involving massive evidence volumes. Kwon faces multiple counts, including securities fraud and market manipulation, tied to the collapse of TerraUSD and Luna. A change of plea may also be strategic, avoiding a lengthy and unpredictable trial. While court documents have not confirmed whether the change will apply to all charges, the judge’s requirement for a narrative allocution suggests that any agreement would require Kwon to admit key facts. This move could also be influenced by the prior civil fraud ruling against him, where he and Terraform Labs were ordered to pay billions in penalties. The hearing may clarify whether this is part of a broader resolution or just a partial settlement of charges.

What happened during the Terra/Luna collapse?

The Terra/Luna collapse occurred in May 2022 when TerraUSD, an algorithmic stablecoin designed to maintain a $1 peg, failed to hold its value. The peg’s collapse triggered a rapid loss in its companion token Luna, which fell from over $80 to near zero in days. The failure was catastrophic, erasing over $40 billion in value from the crypto market. Investors worldwide suffered massive losses, and the collapse destabilized confidence in the broader digital asset ecosystem. This event was particularly damaging because it involved an algorithmic stablecoin — a type of asset that relies on code-based mechanisms rather than direct fiat reserves to maintain value. The incident has since been cited by regulators as a prime example of the systemic risks in crypto markets, fueling calls for tighter oversight and comprehensive stablecoin regulation. The Terra/Luna collapse remains one of the most significant failures in cryptocurrency history.

How is this case different from the SEC’s civil ruling?

The SEC’s civil case against Do Kwon and Terraform Labs focused on violations of securities laws, particularly fraudulent misrepresentation to investors. In that case, Kwon and the company were found liable and ordered to pay $4.5 billion in penalties and disgorgement. Civil cases differ from criminal cases in that they do not typically result in prison sentences but instead impose financial penalties and injunctions. The current criminal case in federal court involves allegations of fraud, market manipulation, and other felony charges, which carry the potential for significant prison time if convicted. While the civil ruling has already been decided, the criminal trial — or potential plea deal — will determine whether Kwon faces incarceration. The two cases are related in subject matter but operate under separate legal frameworks, meaning outcomes in one do not automatically determine the other, though evidence may overlap.

What could a plea deal mean for the crypto industry?

If Do Kwon accepts a plea deal, it could mark one of the largest criminal fraud resolutions in cryptocurrency history. Such a development would signal that high-profile figures in the industry can face serious consequences for mismanagement or deception. It may also embolden regulators and lawmakers to push harder for strict oversight of stablecoins and other high-risk crypto products. For investors, a plea deal could reinforce the importance of due diligence and caution in emerging markets where regulations are still developing. However, the case might also discourage innovative projects that fear aggressive regulatory actions, even when operating in good faith. Regardless, the Terra/Luna collapse has already reshaped discussions about algorithmic stablecoins, risk management, and investor protection. A formal plea from Kwon could close a major chapter in crypto’s legal history while influencing policy directions for years to come.

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