Terra Founder Do Kwon Expected to Change Not Guilty Plea in US Fraud Case

TLDR

• Do Kwon will appear in court Tuesday to potentially change his “not guilty” plea
• Kwon previously pleaded not guilty to multiple fraud charges related to Terra/Luna collapse
• He was extradited to the US in late 2024 after being detained in Montenegro
• Kwon and Terraform Labs were already found civilly liable by the SEC and ordered to pay $4.5 billion
• The Terra ecosystem collapse in 2022 wiped out approximately $40 billion in investor assets

The founder of Terraform Labs, Do Kwon, is expected to change his plea in a federal fraud case, according to a Monday court filing by Judge Paul Engelmayer of the Southern District of New York. Kwon, who had previously pleaded “not guilty” to multiple charges including securities fraud, market manipulation, money laundering, and wire fraud, is scheduled to appear in court on Tuesday morning.

Judge Engelmayer’s order stated that he had been “advised that the defendant may enter a change of plea.” The order did not specify whether Kwon would plead guilty to all charges or if prosecutors had reached a plea deal with his defense team.

The charges stem from Kwon’s role in the operation and subsequent collapse of the Terra/Luna stablecoin ecosystem in 2022. The implosion of the network, once valued at over $18 billion, occurred in a matter of days after the algorithmic stablecoin TerraUSD lost its peg and its companion token Luna lost most of its value.

The collapse resulted in approximately $40 billion in investor losses. Many crypto investors suffered heavy financial damage when the Terra ecosystem crashed, sending shockwaves through the entire cryptocurrency market.

Kwon’s Legal Journey

Kwon’s path to this point has been complicated. After the Terra collapse, his whereabouts were unknown to the public for months until authorities in Montenegro arrested him for attempting to travel using falsified documents.

The Terraform Labs co-founder fought extradition requests from both the United States and South Korea in Montenegrin courts for more than a year. He was finally handed over to US officials in December 2024 following a lengthy legal battle.

Upon his arrival in the US, Kwon pleaded not guilty to all charges in January 2025. He has been held without bail for about seven months while awaiting trial, which had been tentatively scheduled to begin in January 2026.

The discovery process has been extensive, with prosecutors needing to examine six terabytes of data. The complexity of the case reflects the scale of the Terra ecosystem’s impact on the cryptocurrency market.

Civil Liability Already Established

This criminal case follows a civil case brought by the US Securities and Exchange Commission. Kwon and Terraform Labs were already found liable for civil fraud in that SEC lawsuit.

The court ordered them to pay $4.5 billion in penalties and disgorgement, marking one of the largest penalties in cryptocurrency-related legal cases. The civil judgment underscores the scale of the alleged fraud.

Judge Engelmayer’s order on Monday directed the defense attorneys to “review with the defendant any plea agreement or Pimentel letter” before the Tuesday proceeding. The judge also stated that Kwon “should be prepared to give a narrative allocution that incorporates all elements of the offense(s) to which the defendant is pleading guilty.”

The court filing further mentioned that “in the interest of clarity and efficiency, the Court encourages counsel to assist the defendant in writing an allocution that can be read in open court during the plea proceeding.”

It remains unclear what kind of plea deal Kwon’s legal team may have reached with US authorities. According to court documents, the Southern District of New York’s team, led by interim US Attorney Jay Clayton, has engaged in “productive discussions” with Kwon’s lawyers for months.

The Tuesday conference comes less than a week after the same district court found Tornado Cash co-founder Roman Storm guilty of running an unlicensed money transmitting service, showing the US authorities’ continued focus on cryptocurrency-related cases.

Kwon’s attorney did not immediately return requests for comment on the upcoming hearing or potential plea change.