Do Kwon's path to redemption after admitting guilt: From Terra collapse to 5 years of plea bargaining

The crypto catastrophe of 2022 caused global investors to suffer losses of approximately $40 billion. The central figure of this storm—Terraform Labs founder Do Kwon— is now paying a heavy price for his mistakes. After pleading guilty to U.S. authorities in August this year, Kwon recently submitted a 23-page plea letter to the court, earnestly requesting the judge to sentence him to no more than 5 years, in an attempt to secure a glimmer of hope for himself.

The Truth Behind the Terra-Luna Collapse: Kwon’s Deadly Secret

It all began in May 2022. The algorithmic stablecoin TerraUSD (UST) and its sister token LUNA under Terraform Labs collapsed within just a few days. This “chain reaction explosion” not only shattered confidence in the cryptocurrency market but also triggered heightened vigilance from global regulators.

In court documents, Do Kwon admitted to two counts of fraud. But what shocked the market most was the long-hidden “secret agreement.” According to Kwon’s testimony, he had reached an agreement in May 2021 with high-frequency trading firm Jump Trading, asking them to secretly buy in to maintain UST’s price stability. The existence of this agreement, for investors who were completely unaware, directly led to a serious misjudgment of the risks involved.

Kwon now regrets this. His defense lawyer cited a report from blockchain analysis firm Chainalysis in the plea letter, pointing out that part of the responsibility for UST’s collapse lies in “organized third-party companies exploiting vulnerabilities to conduct coordinated trading.” In other words, what appeared to be a sudden crash was actually the result of multiple factors intertwined.

From Arrogance to Despair: Kwon’s Court Confession

In court documents, Do Kwon’s legal team painted a complex portrait of the individual. They argued that Kwon’s criminal behavior was not driven by “greed for personal gain or reckless pursuit of wealth,” but stemmed from early arrogance and the despair faced by a young founder confronted with uncontrollable circumstances.

The U.S. prosecution proposed a maximum sentence of 12 years. But Kwon’s defense team argued that, although this suggestion considered some factors, it failed to fully examine the overall circumstances that support a sentence of no more than 5 years. In other words, they were advocating for a relatively lenient judgment.

On November 26, this substantial plea letter was submitted to the U.S. Southern District Court of New York. Between the lines, it expressed both remorse for the past and a plea for the future.

Indifference to Life and Death, or Fight Back? The Three Dilemmas Kwon Faces

On the surface, Do Kwon only faces sentencing in the United States. But the reality is much more complicated.

First is the hellish detention experience. Since his arrest in March 2023 for using a false passport, Kwon has been detained in Montenegro for nearly two years, enduring solitary confinement at times. It wasn’t until late 2024 that he was extradited to the U.S. for trial. This long wait and punishment have already become an indelible scar in his life.

Second is the multi-national judicial pressure. Besides the U.S. charges, Do Kwon still faces similar charges in South Korea, where prosecutors have proposed an astonishing 40-year prison sentence. In comparison, the U.S. plea for 5 years seems almost “gentle.”

Third is the uncertainty of the sentencing hearing. The sentencing procedure, expected to be held in mid-December, will determine Do Kwon’s fate. Will he receive a lenient sentence close to 5 years? Or will the prosecution’s 12-year recommendation be accepted? Or will the judge impose a harsher penalty? All remains unknown.

The legal team concluded their plea letter by writing: “Do Kwon has already paid a huge price for his actions. Regardless of the verdict, he will face more suffering in the future.” This statement is both a factual acknowledgment and a footnote to Kwon’s tragic life story.

From once a rising star in the crypto world to today a prisoner in court, Do Kwon’s story reminds everyone: in the pursuit of innovation and wealth, honesty and transparency are never luxuries that can be omitted.