Former Terraform CEO pleads guilty to fraud in massive crypto scheme
The co-founder and former CEO of the defunct Terraform Labs blockchain and cryptocurrency company, Kwon pleaded guilty Tuesday to one count of conspiring to commit commodities fraud, securities fraud, and wire fraud, as well as one count of committing wire fraud in connection to his admitted deceitful actions at Terraform.
"Do Kwon used the technological promise and investment euphoria around cryptocurrency to commit one of the largest frauds in history," said U.S. Attorney Jay Clayton in a press release.
According to the U.S. Attorney's Office of the Southern District of New York, Terraform, under Kwon, offered a unique blockchain that issued stablecoins under a distinct protocol that it falsely claimed would maintain a fixed value even when market conditions would fluctuate.
Kwon sought and acquired agreements from several investment firms around the world to buy or lend Terraform's cryptocurrencies built on the Terraform blockchain.
Terraform's stablecoin UST was attached to the U.S. dollar, and under claims that one UST coin could always be exchanged for $1 of its blockchain's native LUNA token, the market value of all UST and LUNA had surpassed $50 billion by the spring of 2022.
It turned out that a great deal of that financial growth was due to falsifications about Terraform and its technology by Kwon, which led to UST and LUNA suffering a collapse of value that caused investors to suffer than $40 billion in losses.
Kwon then covered up his criminal acts by distributing a false audit.
He then fled to Europe and spent 18 months on the run while traveling on a false passport before being arrested in March of 2023 in Europe and then extradited in January to the United States from Montenegro to the United States.
Kwon, who will be sentenced in December, has agreed to surrender more than $19 million in proceeds from his criminal gains as part of a plea deal which also includes that prosecutors not seek a sentence longer than 12 years.
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