Kwon Do-hyung, the founder of Terraform Labs, who is undergoing a criminal trial in the United States related to fraud involving the stablecoin 'TerraUSD' (hereinafter referred to as Terra), has changed his stance and acknowledged his guilt, significantly reducing his maximum sentence. There are also suggestions that he could be repatriated to Korea after serving some time in the U.S.
On the 11th (local time), Kwon acknowledged his guilt regarding conspiracy to commit fraud and fraud via a communication network during a hearing held at the U.S. District Court for the Southern District of New York. According to a plea bargain agreement, prosecutors decided to recover $19 million (approximately 26.5 billion won) and other properties from Kwon.
Separately, Kwon and Terraform Labs have agreed to pay $4.47 billion (approximately 62 trillion won) as a restitution fee and fine in a civil lawsuit filed by the U.S. Securities and Exchange Commission (SEC).
The maximum combined sentence for the conspiracy to commit fraud (5 years) and fraud via a communication network (20 years) that Kwon acknowledged is a total of 25 years. However, prosecutors decided to seek a maximum of 12 years of imprisonment for Kwon without additional charges, according to the plea agreement. Additionally, if he serves half of the final sentence and complies with the terms of the plea bargain, Kwon has the option to apply for an international prisoner transfer program, with the U.S. Department of Justice agreeing not to oppose it. This means that if Kwon applies to go to Korea, he could serve half of his sentence there.
Apart from the criminal trial in the U.S., Kwon has also been charged in Korea with violations of the Capital Markets Act. After being arrested in Montenegro, he claimed he should be repatriated to Korea instead of the United States but eventually was sent to the U.S.
Terraform Labs has claimed that while issuing the stablecoin Terra, it was designed to be linked to $1 through an algorithm called the 'Terra Protocol.' However, contrary to Terraform Labs' claims, there are suspicions that trading companies contracted with Terraform Labs artificially propped up Terra's price. Ultimately, Terra's link to the U.S. dollar broke, causing significant damage to numerous investors.