All news is rigorously fact-checked and reviewed by leading blockchain experts and seasoned industry insiders.
- Under a plea deal, Do Kwon faces a maximum sentence of 12 years if he cooperates fully; otherwise, penalties could reach 25 years, with sentencing scheduled for December.
- Terra Classic (LUNC) price dropped to $0.00005979 following the news before rebounding 2.83%, while Kwon still faces legal proceedings in South Korea.
Terra Classic (LUNC) took a hit as Do Kwon, the embattled co-founder of Terraform Labs, who was extradited to the US in March, pleaded guilty to two felony charges related to one of the most notorious collapses in cryptocurrency, as mentioned in our previous story.
Terra Founder Do Kwon Finally Pleads Guilty In Court
Records in the court, as explained by Inner City Press, show the 33-year-old has admitted to conspiracy and wire fraud in connection with the collapse of the TerraUSD (USTC) stablecoin and its sister token Terra Luna. In 2022, the infamous event erased about $40 billion in market value.
Presiding Judge Paul Engelmayer questioned Do Kwon to confirm his understanding of the plea. According to a CNBC report, Kwon, in an orange prison suit and in a federal courtroom in New York, admitted to the charges on Tuesday. He said,
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.
The U.S. government will offer a sentence of not more than 12 years if Do Kwon fulfills all the requirements of cooperation according to the agreement reached with the prosecutors. In the absence of that provision, the charges have a possible maximum penalty of 25 years. Sentencing is scheduled for December.
Alleged Orchestration Of A Market Rescue
Prosecutors described how Kwon made the public claim in May 2021 that the algorithm of TerraUSD had stabilized itself after falling below its target of $1 all by itself. In fact, as investigators claim, he quietly recruited a high-frequency trading firm to mobilise millions of dollars worth of buy orders to prop up the price.
The resulting activity led to fresh investor confidence that pushed the market capitalization of Luna to nearly $50 billion by the beginning of 2022. This was combined with the fact that once the valuation of the tokens hit rock bottom, thousands of investors incurred huge losses.
Court filings also accuse Do Kwon of hiding the deficiencies in the Terra ecosystem, which includes payment platform Chai and the Mirror Protocol, as he didn’t disclose information regarding vulnerabilities of the stablecoin. Amid these revelations, Terra Luna’s revamped version Terra Classi,c price slumped to a low of $0.00005979 on Tuesday, August 12. However, LUNC soon stabilized with a 2.83% gain on Wednesday, trading at $0.00006186.
Financial Penalties and Other Cases
As part of the plea agreement, over $19 million in assets will be forfeited in addition to the civil settlement that reached $4.55 billion earlier this year with the U.S. Securities and Exchange Commission. That settlement also saddled $80 million fine on Kwon as an individual and made him a permanent and lifelong ineligible person to work in the cryptocurrency industry.
Kwon remains under legal threat in South Korea, where the prosecution has charged him with further criminal liability. Policemen in the country have indicated that they might want to extradite him after U.S proceedings are over.
