Do Kwon’s fall from crypto wunderkind to fraudster has recently reached its final act. The Terraform Labs co-founder, once hailed as a visionary, has pleaded guilty to charges tied to the $40 billion collapse of TerraUSD and Luna. As one of the most catastrophic financial collapses in crypto history, his admission is prompting a fresh wave of reaction across the community.
Summary
- Do Kwon, the co-founder of Terraform Labs, has pleaded guilty to committing fraud in the $40 billion TerraUSD and Luna collapse.
- Many in the crypto community view the guilty plea as long-awaited justice.
- Terraform Labs creditors are still awaiting clarity on what comes next.
Following Do Kwon’s guilty plea and admission to charges including conspiracy to commit fraud, several industry members took to social media to express relief, anger, and a sense of vindication.
Community reacts to Do Kwon’s guilty plea
On X, user Rui wrote: “Good to see justice done on the $40B crypto crash,” recapping the extent of Kwon’s fraudulent scheme. Another commenter, Bubble, declared “Justice prevails at last,” while well-known Terra critic FatManTerra described the moment as “vindication after years of work.”
The discussion quickly turned to Kwon’s potential sentence. The disgraced crypto mogul faces up to 25 years in prison, but his guilty plea could see that reduced to around 12 years, a possibility that has angered many. User Radstaker argued: “Do Kwon belongs in jail for 25 years minimum,” while FatManTerra added that 15 to 20 years is more plausible.
But according to some others, both the potential 12 and 25 years are way too lenient. One commenter wrote, “I hope Do Kwon goes to prison and they throw away the key. That is the minimum justice he should face.”
Amid the outrage, others disagreed. One commenter argued that Kwon was not criminally responsible for the May 2022 collapse, claiming the blockchain was “attacked and successfully broken” rather than mismanaged. “He may be a failure, but he is no criminal,” they wrote.
Another person added that “There was no crime. The entire mechanism was public in the smart contract. He didn’t conspire to commit wire fraud.”
How the Terra collapse happened
The Terra ecosystem imploded in May 2022 after its stablecoin UST lost its peg to the U.S. dollar, causing a $40 billion wipeout. Unlike reserve-backed stablecoins, UST relied on a mint-and-burn mechanism with its sister token, LUNA, to maintain its value.
The cracks began when large withdrawals from Anchor Protocol, a lending platform offering 20% yields on UST deposits, put heavy sell pressure on the stablecoin. UST slipped from $1 to $0.98 before dropping lower, sparking panic among traders who dumped their holdings and deepened the depeg.
Terraform Labs tried to fix the peg by minting massive amounts of LUNA, but this only flooded the market, collapsing LUNA’s price from over $80 to fractions to under a cent. Even after deploying $3 billion in Bitcoin (BTC) reserves to restore UST’s peg, they couldn’t stop the spiral.
The fallout left millions of investors with heavy losses and marked one of the largest failures in crypto history. Do Kwon was subsequently arrested in Montenegro in March 2023, after being on the run for several months. His eventual extradition to the U.S. occurred in late 2024, now leading to his latest plea.
However, for many, the real question isn’t about Kwon’s sentence or innocence, but whether his plea will translate into meaningful compensation for victims.
What Do Kwon’s admission of guilt means for creditors
Many community members have renewed calls for the refund of their lost funds. Kwon’s guilty plea involves the forfeiture of $19 million in penalty, and some are wondering if the funds will go towards settling victims of the crash.
So far, there’s no clear answer. Terraform Labs’ reimbursement efforts have been largely silent in recent months, with the last major update coming on May 14, 2025, when the company announced the deadline for its claims portal via X.
TerraformLabs filed for Chapter 11 bankruptcy in January 2024, which was approved by the U.S. Bankruptcy Court of Delaware in September of the same year.
Until more details emerge, creditors remain in limbo. Meanwhile, the guilty plea has yet to have any significant effect on prices, with Terra (LUNA) up just 6% and Terra Luna Classic (LUNC) rising only 4% in the past 24 hours.
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