Do Kwon to Change Plea in $40B Terra Collapse Fraud Case Today

• Do Kwon’s plea change could reshape $40B Terra fraud case.
• Judge demands full defense narrative ahead of Kwon’s plea shift.
• LUNA price dips slightly as markets await Kwon’s next move.

Do Kwon, co-founder of Terraform Labs, is expected to change his Plea in a $40 billion fraud case in a New York federal court today, Tuesday, August 12. According to court filings, Judge Paul Engelmayer confirmed being notified of Kwon’s plan to plead differently. He instructed him to submit a complete narrative defense covering all aspects of the charges.

The charges, filed in March 2023, include securities fraud, wire fraud, commodities fraud, conspiracy to defraud, market manipulation, and money laundering conspiracy. Prosecutors have associated them with the 2022 de-pegging of the algorithmic stablecoin TerraUSD (UST) and the governance token LUNA created by Terraform and the loss of billions of dollars in market capitalization.

According to authorities, the UST system, which was supposed to maintain the token pegged due to incentives linked to LUNA, collapsed in May 2022 and caused massive losses to investors. After the crash, Kwon was a fugitive for a couple of months before being arrested by Montenegro authorities on the grounds of traveling on false documents.

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Long Legal Battle Nears a Turning Point

Kwon was extradited to the United States in December 2024 after months in custody abroad. In January 2025, he pleaded not guilty to all charges and has been detained without bail since then.

According to the court documents, fruitful negotiations are taking place between the U.S. Attorney General and the defense of Kwon. The plea change is not long after the same court accused the co-founder of Tornado Cash, Roman Storm, pointing to greater federal attention to crypto-related prosecutions.

The market’s response to the development has been subdued. At the time of writing, LUNA was at the price of $0.00008, with a decrease of approximately 1 percent in the day. According to analysts, a plea deal might introduce clarity to the legal situation, but it would also be a sign that something wrong had occurred and would curtail market enthusiasm.

The criminal case is independent of a civil action taken by the U.S. Securities and Exchange Commission. That case was concluded in 2024 when Terraform Labs settled to pay about $4.5 billion as penalties.

Kwon’s expected plea shift could significantly shape the future of the high-profile Terra collapse case and its potential legal outcomes.

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