'Crypto cash king' pleads guilty in bombshell case that caused $40,000,000,000 collapse
South Korean entrepreneur Do Kwon has pleaded guilty to fraud charges that wiped out an estimated $40 billion in investor funds during 2022's crypto market crash.
Do Kwon's case adds to a growing list of high-profile cryptocurrency prosecutions.
Back in March, another so-called 'crypto king' Sam Bankman-Fried, revealed whether he's sitting on any money after the collapse of FTX's $32 billion empire.
He also shared his thoughts on where digital currencies might be headed in the future under President Donald Trump, during an interview with Tucker Carlson.
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Now, the 33-year-old co-founder of Singapore-based Terraform Labs appeared in a New York federal court on Tuesday (19 August), where he admitted guilt to conspiracy to defraud and wire fraud charges before US District Judge Paul Engelmayer.
Kwon developed two digital currencies that became central to the massive collapse.
TerraUSD, a so-called 'stablecoin' designed to maintain a steady $1 value, and Luna, a more traditional cryptocurrency that fluctuated in price but was closely tied to TerraUSD's performance.
When TerraUSD's price dropped below $1 in May 2021, Kwon told investors that a computer program called 'Terra Protocol' had automatically fixed the problem and restored the $1 value.
However, instead, Kwon had secretly paid a trading company to buy millions of dollars' worth of TerraUSD tokens, artificially pushing the price back up to make it appear as though the technology was working.
According to the prosecutor, this deception convinced investors to pour money into both currencies. As a result, Luna's value skyrocketed to $50 billion by spring 2022. However, by May 2022, both currencies had plummeted to nearly zero, wiping out fortunes and triggering a cryptocurrency market collapse.
Originally facing a nine-count indictment including securities fraud, wire fraud, commodities fraud, and money laundering conspiracy, Kwon had initially pleaded not guilty in January. However, he changed his plea Tuesday under an agreement with the Manhattan US Attorney's office.
“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,” Kwon admitted in court. “What I did was wrong.”
Kwon faces up to 25 years in prison when Judge Engelmayer sentences him on 11 December. However, prosecutor Kimberly Ravener revealed that the government would recommend no more than 12 years if Kwon continues accepting responsibility for his crimes.
The South Korean entrepreneur previously agreed to pay $80 million in civil fines and accept a lifetime ban from cryptocurrency transactions as part of a massive $4.55 billion settlement between him, Terraform Labs, and the Securities and Exchange Commission.
Kwon has been detained since his extradition from Montenegro late last year and also faces separate charges in his home country of South Korea.