Do Kwon

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Do Kwon
Born: September 6, 1991
Seoul, South Korea
Charges:
Sentence: Awaiting sentencing (December 2025)
Facility: Federal detention
Status: Awaiting sentencing


Kwon Do-hyung (Korean: 권도형), known professionally as Do Kwon, is a South Korean cryptocurrency entrepreneur and co-founder of Terraform Labs, the company behind the TerraUSD (UST) stablecoin and LUNA cryptocurrency. In May 2022, the catastrophic collapse of UST and LUNA wiped out approximately $40 billion in value, devastating investors worldwide. After fleeing South Korea and being captured in Montenegro in 2023, Kwon was extradited to the United States in December 2024 and pleaded guilty to federal fraud charges in August 2025. Prosecutors are seeking 12 years in federal prison.

Early Life and Education

Do Kwon was born on September 6, 1991, in Seoul, South Korea, into a middle-class family. He demonstrated exceptional aptitude in technology and mathematics from an early age, excelling in competitive programming and computer science competitions during his secondary education.

Kwon attended Stanford University in California, where he studied computer science and graduated in 2015. At Stanford, he developed expertise in distributed systems and blockchain technology, exposure that would later shape his cryptocurrency ventures. He was known among peers as ambitious and technically skilled, though some classmates later recalled his dismissive attitude toward those who questioned his ideas.

After graduating from Stanford, Kwon worked briefly as a software engineer at both Microsoft and Apple, gaining experience in large-scale technology infrastructure. However, he found corporate employment stifling and quickly left to pursue entrepreneurship. In 2016, he co-founded Anyfi, a peer-to-peer wireless mesh network startup that aimed to decentralize internet connectivity. While Anyfi generated some initial traction, it failed to achieve significant commercial success and ultimately shut down, though the experience gave Kwon his first exposure to decentralized network design.

Terraform Labs and Terra Blockchain

Founding

In January 2018, Kwon co-founded Terraform Labs with Daniel Shin, a prominent South Korean entrepreneur who had previously founded the e-commerce platform TMON (Ticket Monster). The partnership paired Kwon's technical expertise with Shin's business acumen and connections in the South Korean tech scene. The company was initially based in Seoul and later incorporated in Singapore to take advantage of the city-state's more favorable regulatory environment for cryptocurrency businesses.

Terraform Labs developed the Terra blockchain, which aimed to create a decentralized payment network using stablecoins—cryptocurrencies designed to maintain a stable value, typically pegged to a fiat currency like the U.S. dollar. The project raised approximately $32 million in initial funding from prominent cryptocurrency venture capital firms including Pantera Capital, Coinbase Ventures, and Binance Labs. Kwon's vision was to create a blockchain-based payment system that could rival traditional payment networks like Visa and Mastercard, using stablecoins to eliminate the price volatility that prevented most cryptocurrencies from being used for everyday transactions.

TerraUSD (UST) and LUNA

The company's flagship products were:

  • TerraUSD (UST): An "algorithmic stablecoin" designed to maintain a 1:1 peg with the U.S. dollar
  • LUNA: A cryptocurrency token used to stabilize UST's price through an arbitrage mechanism

Unlike traditional stablecoins backed by actual dollar reserves (like USDC or USDT), UST maintained its peg through an algorithm that allowed users to exchange UST for LUNA and vice versa. The system was designed so that if UST fell below $1, users could burn UST to mint LUNA, reducing UST supply and theoretically restoring the peg.

Rise to Prominence

By early 2022, UST had become the third-largest stablecoin by market capitalization with over $18 billion in circulation, and LUNA reached a peak price of over $116 in April 2022. The Terra ecosystem was valued at over $40 billion, making it one of the largest cryptocurrency projects in the world. Major financial institutions and cryptocurrency exchanges had integrated Terra into their platforms, and the project was widely viewed as a leading innovation in decentralized finance.

Kwon cultivated an aggressive, confrontational persona on social media, dismissing critics with contempt and projecting supreme confidence in Terra's design. He famously told skeptics that he didn't debate "poor people" and referred to failed crypto projects as entertainment, tweeting "I don't debate the poor on Twitter, and sorry I don't have any change on me for her at the moment." When critics raised concerns about the sustainability of Terra's model, Kwon mocked them publicly and doubled down on his positions. He once proposed a $1 million bet with a crypto researcher who questioned UST's stability, projecting absolute confidence in the system's resilience. This brash persona attracted a devoted following of investors who viewed Kwon as a visionary willing to challenge the establishment, but it also created a culture that discouraged critical examination of Terra's vulnerabilities.

Anchor Protocol

A key driver of Terra's growth was Anchor Protocol, a lending platform that offered depositors yields of nearly 20% annually on their UST—far above traditional interest rates and even high-yield savings accounts. At its peak, Anchor held over $14 billion in UST deposits, representing the majority of all UST in circulation. The protocol became the primary use case for UST and was central to driving adoption of the Terra ecosystem.

Critics warned these yields were unsustainable and compared the structure to a Ponzi Scheme, as the high returns were largely subsidized by Terraform Labs rather than generated through legitimate lending activity. Documents later revealed that Terraform Labs spent hundreds of millions of dollars to maintain Anchor's yield, artificially propping up returns to attract and retain depositors. The yields were not sustainable based on actual borrowing demand or revenue generation, but rather depended on a continuous influx of new capital and subsidies from Terraform Labs' reserves. This created a fragile system vulnerable to any loss of confidence: if depositors began withdrawing faster than new deposits arrived, the entire structure would collapse. Despite these red flags, Anchor's high yields attracted billions from retail investors seeking returns unavailable in traditional finance, many of whom were unaware of the risks inherent in the subsidy-dependent model.

The Collapse

May 2022 Crash

On May 7, 2022, a series of large withdrawals from Anchor Protocol triggered a crisis of confidence in UST. As holders began selling UST, the stablecoin lost its $1 peg, falling to around $0.91.

The algorithmic mechanism designed to restore the peg instead created a "death spiral":

  • UST holders rushed to redeem their stablecoins for LUNA
  • This massively inflated LUNA's supply, crashing its price
  • The falling LUNA price further undermined confidence in UST
  • The cycle accelerated exponentially

Within days:

  • UST collapsed to near zero, ultimately trading at fractions of a cent
  • LUNA fell from over $80 to effectively worthless
  • The total market capitalization of the Terra ecosystem—once over $40 billion—was destroyed

Investor Impact

The collapse devastated investors worldwide:

  • Retail investors lost life savings they had deposited in Anchor Protocol
  • Several suicides were reported in connection with Terra losses
  • Institutional investors also suffered significant losses
  • The collapse triggered broader cryptocurrency market contagion, contributing to losses across the sector

Criminal Investigation and Flight

SEC Charges

In September 2022, the U.S. Securities and Exchange Commission (SEC) filed charges against Terraform Labs and Do Kwon, alleging they had conducted a multi-billion dollar Securities Fraud. The SEC's complaint alleged that Kwon and Terraform Labs had misled investors about the stability of UST, falsely claiming the stablecoin had maintained its peg during previous stress tests when in fact Terraform Labs had secretly intervened to prop up the price. The SEC specifically pointed to a May 2021 incident where UST briefly lost its peg, and Kwon publicly attributed the recovery to the algorithmic mechanism, when documents later revealed that Terraform Labs had arranged for a third party to purchase massive amounts of UST to artificially restore the peg. The charges also alleged that Kwon and Terraform Labs had misrepresented Chai Corporation's use of the Terra blockchain, falsely claiming that millions of transactions were occurring on Terra through Chai's payment app when in reality Chai was not using the blockchain as described.

South Korean Investigation

South Korean prosecutors opened their own criminal investigation and issued an arrest warrant for Kwon in September 2022 on charges including fraud and violations of capital markets law. The Seoul Southern District Prosecutors' Office led the investigation, which focused not only on the Terra collapse but also on allegations that Kwon had illegally cashed out hundreds of millions of dollars before the crash. South Korean authorities froze assets belonging to Kwon and other Terraform Labs executives and raided the homes of employees and investors connected to the company. The investigation revealed that Kwon and co-founder Daniel Shin had extracted approximately $105 million from the Terra project before its collapse. South Korean prosecutors also investigated whether Kwon had manipulated the price of LUNA and UST to enrich himself and other insiders at the expense of retail investors.

On the Run

Despite the arrest warrant, Kwon evaded capture for months. He left South Korea for Singapore before the warrant was issued, claiming he was relocating for business purposes. When Singapore authorities indicated they would cooperate with extradition requests, Kwon disappeared from the city-state, and his subsequent whereabouts became unknown. Interpol issued a Red Notice for his arrest in September 2022, putting him on the international law enforcement wanted list.

Kwon maintained an active social media presence while on the run, tweeting that he was "making zero effort to hide" while simultaneously evading authorities across multiple jurisdictions. This audacious behavior drew widespread criticism and comparisons to other fugitive crypto entrepreneurs. He continued to tweet about cryptocurrency markets and Terra-related developments, claiming he was cooperating with authorities while clearly avoiding arrest. His brazen public statements while fugitive status added to the perception of arrogance that had characterized his public persona. Investigators later determined that Kwon had traveled through multiple countries including Serbia, where he allegedly spent several months, before ultimately attempting to flee to Dubai via Montenegro.

Arrest in Montenegro

On March 23, 2023, Kwon was arrested at Podgorica Airport in Montenegro while allegedly attempting to travel to Dubai using falsified Costa Rican travel documents. Montenegrin authorities detained him on document forgery charges after border control officers discovered irregularities in his passport and other identification documents. At the time of his arrest, Kwon was traveling with Han Chang-joon, Terraform Labs' former chief financial officer, who was also using forged documents and was arrested alongside Kwon.

Kwon was convicted in Montenegro of document forgery and sentenced to four months in prison, which he served in Montenegrin detention while both the United States and South Korea competed for his extradition. The relatively minor forgery conviction allowed both countries time to pursue formal extradition proceedings. During his detention in Montenegro, Kwon's legal team fought vigorously against extradition, filing multiple appeals and attempting to delay his transfer. The extradition battle became politically charged, with both the U.S. and South Korean governments applying significant diplomatic pressure on Montenegro to extradite Kwon to their respective jurisdictions.

Extradition and U.S. Prosecution

Extradition Battle

Both the United States and South Korea sought Kwon's extradition, creating a complex legal battle that lasted over a year and a half. Montenegrin courts initially approved extradition to South Korea in December 2023, a decision that reflected South Korea's status as the jurisdiction where Terra had caused the most concentrated damage and where Kwon held citizenship. However, the decision was overturned on appeal in March 2024 after the Montenegrin appellate court found procedural irregularities in the lower court's ruling.

The legal proceedings became increasingly convoluted as Kwon's defense team exploited every available procedural avenue to delay extradition. The case took several unexpected turns, including allegations of political interference and corruption in the Montenegrin justice system. Ultimately, in December 2024, Montenegro's Justice Minister made the final decision to extradite Kwon to the United States rather than South Korea. The decision was reportedly influenced by the severity of the U.S. charges, the strength of the U.S. evidence, and diplomatic considerations regarding Montenegro's relationship with the United States. The U.S. also provided assurances that Kwon could potentially face charges in South Korea after completing any U.S. sentence.

Arrival in United States

On December 31, 2024, Kwon was extradited to the United States to face federal charges in the Southern District of New York, one of the most prominent federal court districts for prosecuting financial crimes. He was transported via private aircraft under heavy security and taken into federal custody upon arrival at a New York-area airport. Kwon made his initial appearance before a federal magistrate judge within days of his arrival, where he was formally advised of the charges against him and ordered held in federal detention pending trial. The detention decision reflected the severity of the charges, his status as a foreign national with no ties to the United States, and his demonstrated history of international flight to avoid prosecution.

Federal Charges

Kwon was charged with:

  • Securities Fraud - for misleading investors about the stability and safety of UST and LUNA
  • Wire Fraud - for using interstate wire communications to execute the fraudulent scheme
  • Commodities fraud - for manipulating and deceiving investors in cryptocurrency commodities
  • Money Laundering conspiracy - for concealing and moving proceeds from the fraudulent scheme

The eight-count indictment alleged that Kwon and Terraform Labs orchestrated a multi-billion dollar fraud that deceived investors about the fundamental mechanics of the Terra blockchain. Prosecutors alleged that Kwon knowingly made false statements about UST's stability, concealed the degree to which Terraform Labs was artificially propping up the system, and misrepresented the ecosystem's adoption and usage. The charges carried potential sentences of decades in federal prison—securities fraud alone carries a maximum of 20 years, while Wire Fraud carries up to 20 years per count, and Money Laundering conspiracy carries up to 20 years.

Guilty Plea

On August 2025, Do Kwon pleaded guilty to federal fraud charges in a dramatic reversal after initially indicating he would fight the charges at trial. In his plea hearing before U.S. District Judge, he acknowledged deceiving investors about the stability and safety of the Terra ecosystem, admitting that he had made materially false statements about how UST maintained its peg and about Terraform Labs' role in artificially supporting the price.

Under the terms of his plea agreement, Kwon pleaded guilty to one count of conspiracy to commit Securities Fraud, Wire Fraud, and commodities fraud. In exchange for his cooperation and guilty plea, prosecutors agreed to dismiss the remaining counts at sentencing. The plea agreement included Kwon's acknowledgment that he was responsible for losses exceeding $40 billion, though the exact amount to be used in sentencing calculations would be determined by the court. Kwon also agreed to cooperate with ongoing investigations into the Terra collapse and to assist in efforts to recover assets for defrauded investors. The guilty plea eliminated the need for a lengthy trial that would have featured testimony from devastated investors and extensive evidence of Kwon's deceptive conduct.

Sentencing

As of December 2025, Kwon is awaiting sentencing scheduled for December 11, 2025. Federal prosecutors have filed sentencing memoranda seeking a 12-year prison sentence, arguing that Kwon's conduct warrants substantial punishment to reflect the unprecedented scale of the fraud, the devastating impact on thousands of victims, and the need for deterrence in the rapidly evolving cryptocurrency industry.

In their sentencing submission, prosecutors emphasized several aggravating factors: the massive $40 billion loss amount, Kwon's deliberate deception of investors through false statements about UST's stability mechanisms, his extraction of over $100 million before the collapse, his flight from justice and extended period as a fugitive using false documents, and his arrogant public persona that mocked critics who tried to warn investors. Prosecutors compared the case to other major cryptocurrency frauds, including Sam Bankman-Fried's 25-year sentence for the FTX collapse, while noting that Kwon's cooperation and guilty plea merit some reduction from the statutory maximum.

Kwon's defense attorneys have argued for a shorter term of approximately 6-8 years, emphasizing his cooperation with authorities, his guilty plea that spared victims from reliving trauma through trial testimony, his lack of prior criminal history, and their argument that he genuinely believed in the Terra project's technology even as it failed. The defense has also pointed to Kwon's youth and potential for rehabilitation, arguing that an excessive sentence would serve no purpose beyond pure punishment. The final sentence will be determined by the judge after considering the federal Sentencing Guidelines, victim impact statements, and arguments from both sides.

Civil Proceedings

SEC Civil Case

In April 2024, a federal jury found Terraform Labs and Do Kwon liable for civil Securities Fraud after a two-week trial in Manhattan federal court. The jury concluded that Kwon and Terraform Labs had violated federal securities laws by making material misrepresentations to investors about the Terra ecosystem, including false claims about UST's stability mechanism and misleading statements about the blockchain's commercial adoption.

The SEC subsequently reached a settlement with Terraform Labs for $4.47 billion, though the company's bankruptcy limited the amount that would actually be collected. The settlement represented one of the largest ever obtained by the SEC in a cryptocurrency case and sent a strong signal about the agency's commitment to enforcing securities laws in the digital asset space.

Kwon personally was ordered to pay $110 million in civil penalties and disgorgement, though collection of this amount faces significant practical challenges given Kwon's detention and the freeze on his assets. The civil judgment serves as a separate form of accountability beyond the criminal prosecution and ensures that even if criminal restitution proves insufficient, the government has established Kwon's liability for the full scope of investor losses.

Terraform Labs Bankruptcy

Terraform Labs filed for Chapter 11 bankruptcy protection in January 2024, citing liabilities that far exceeded its remaining assets. The bankruptcy filing listed assets of less than $500 million against claims that could exceed $40 billion from defrauded investors and regulatory judgments.

The bankruptcy proceedings have been complicated by competing claims from investors, regulatory agencies, and other creditors. The company's remaining assets include cryptocurrency holdings, intellectual property rights to the Terra blockchain code, and claims against various parties who received funds from Terraform Labs. Bankruptcy trustees have pursued clawback actions against investors and executives who withdrew funds before the collapse, seeking to recover assets for the benefit of defrauded creditors. The bankruptcy process has provided a venue for investors to file formal claims for their losses, though the realistic recovery rate is expected to be minimal given the massive shortfall between assets and liabilities. The proceedings continue as of late 2025, with creditors receiving only pennies on the dollar for their losses.

Impact and Legacy

Regulatory Response

The Terra collapse prompted significant regulatory action and accelerated calls for comprehensive cryptocurrency regulation:

  • Increased scrutiny of stablecoins: Regulators worldwide focused attention on stablecoins, particularly algorithmic stablecoins like UST that lacked traditional reserve backing. The collapse demonstrated the systemic risks posed by stablecoins that depend on complex mechanisms rather than actual assets.
  • Legislative proposals: The collapse catalyzed legislative efforts in the United States and globally to require stablecoins to maintain full reserve backing with traditional assets. Congressional hearings featured testimony about the Terra collapse and its implications for financial stability.
  • Enhanced enforcement: The SEC and other agencies dramatically increased enforcement actions against cryptocurrency projects, using the Terra case as a template for pursuing fraudulent misrepresentations in the digital asset space. The case established clear precedent that cryptocurrency tokens could be securities subject to federal securities laws.
  • International coordination: The cross-border nature of Kwon's flight and the global impact of Terra's collapse led to enhanced cooperation among international financial regulators and law enforcement agencies in pursuing cryptocurrency fraud cases.

Industry Impact

The Terra collapse triggered a contagion effect that accelerated a broader cryptocurrency market downturn throughout 2022:

  • Institutional failures: The collapse directly contributed to the fall of several major cryptocurrency firms. Three Arrows Capital, a prominent crypto hedge fund with significant LUNA and UST exposure, collapsed in June 2022 after suffering catastrophic losses from Terra. The fund's failure created a domino effect, contributing to the bankruptcies of crypto lenders Celsius Network, Voyager Digital, and BlockFi, all of which had exposure to Three Arrows Capital or Terra-related assets.
  • Market confidence: The collapse severely undermined public confidence in algorithmic stablecoins and cryptocurrency innovation more broadly. Multiple other algorithmic stablecoin projects either shut down voluntarily or saw their tokens lose their pegs as investors fled anything resembling Terra's model.
  • Market losses: The Terra collapse contributed to over $1 trillion in total cryptocurrency market capitalization losses during 2022. Bitcoin fell from around $40,000 to below $20,000, and many altcoins lost 80-90% of their value as the contagion spread throughout the market.
  • Venture capital retreat: Cryptocurrency venture capital funding declined dramatically following the Terra collapse, as investors became more cautious about backing unproven blockchain projects making ambitious technical claims.

Victim Impact

The human toll of the Terra collapse was devastating and global in scope. Thousands of retail investors worldwide lost substantial sums, with many losing their entire life savings that they had deposited in Anchor Protocol seeking the advertised 20% yields.

The collapse particularly affected investors in South Korea, where cryptocurrency trading is extremely popular and Terra had been marketed as a homegrown success story. South Korean investors accounted for a significant portion of the losses, with many middle-class families losing money they had saved for years. Several suicides were reported in South Korea and other countries in the aftermath of the collapse, with victims leaving notes explicitly citing their Terra losses.

Beyond the immediate financial devastation, victims faced secondary impacts including family breakups, mental health crises, and inability to meet financial obligations like mortgages or children's education expenses. Many victims had not only invested their own savings but had borrowed money or encouraged family members to invest based on Kwon's promises and the project's apparent legitimacy. Victim impact statements filed in Kwon's criminal case describe investors who lost homes, retirement savings, and hope for their financial futures. The psychological impact of having been deceived—compounded by Kwon's arrogant dismissal of critics—added to the trauma of the financial losses.

See Also

Frequently Asked Questions

Q: Who is Do Kwon?

Do Kwon is the South Korean co-founder of Terraform Labs and creator of the TerraUSD (UST) stablecoin and LUNA cryptocurrency, which collapsed in May 2022, wiping out approximately $40 billion in value.


Q: What happened to TerraUSD and LUNA?

In May 2022, TerraUSD lost its $1 peg, triggering a death spiral that caused both UST and LUNA to collapse to near zero, destroying over $40 billion in market value within days.


Q: Where was Do Kwon arrested?

Do Kwon was arrested at Podgorica Airport in Montenegro on March 23, 2023, while allegedly attempting to travel with falsified Costa Rican documents. He was later extradited to the United States.


Q: What is Do Kwon charged with?

Kwon pleaded guilty to securities fraud, wire fraud, commodities fraud, and money laundering conspiracy in connection with the Terra collapse. Prosecutors are seeking 12 years in prison.


Q: How much money was lost in the Terra collapse?

The collapse of TerraUSD and LUNA destroyed approximately $40 billion in market value, devastating retail and institutional investors worldwide.


References


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