Terraform Labs / TerraUSD (UST) collapse

Terraform Labs, co-founded by Do Kwon, sold an interconnected suite of crypto assets from April 2018 until May 2022, centered on TerraUSD (UST), an "algorithmic stablecoin," and its sister token LUNA. Per the SEC, Kwon falsely claimed the Korean payments app Chai settled transactions on the Terra blockchain, and when UST depegged in May 2021 he secretly arranged for a third-party trading firm to buy massive amounts of UST to restore the peg while publicly crediting the algorithm. In May 2022 UST depegged again and the ecosystem collapsed, wiping out roughly $40 billion (some estimates ~$50 billion across three days) and triggering cascading 2022 crypto failures.

On April 5, 2024, a New York jury unanimously found Terraform and Kwon liable for securities fraud in the SEC's civil case. In June 2024 they agreed to pay over $4.5 billion — Terraform: $3.59B disgorgement, $467M prejudgment interest, $420M civil penalty; Kwon: $110M disgorgement plus $14.3M interest and an $80M penalty — with Terraform winding down operations and distributing assets to victims through bankruptcy.

Criminally, Kwon was extradited from Montenegro (arrested there in March 2023, roughly 21 months in custody) and handed to the FBI on December 31, 2024, appearing before a magistrate in the Southern District of New York. On August 12, 2025, he pleaded guilty to two counts — conspiracy to commit commodities, securities, and wire fraud, and wire fraud — down from nine counts carrying up to 130 years, and agreed to forfeit over $19 million. On December 11, 2025, Judge Paul A. Engelmayer sentenced him to 15 years in prison — above the 12 years prosecutors sought — calling it "a fraud of epic generational scale". Kwon must serve at least half the sentence before prosecutors will support transfer to South Korea, where he faces further charges.

Sources: [SEC press release 2024-73](https://www.sec.gov/newsroom/press-releases/2024-73), [SEC charges (2023-32)](https://www.sec.gov/newsroom/press-releases/2023-32), [DOJ SDNY sentencing release](https://www.justice.gov/usao-sdny/pr/crypto-enabled-fraudster-sentenced-orchestrating-40-billion-fraud), [DOJ extradition release](https://www.justice.gov/archives/opa/pr/do-kwon-extradited-united-states-montenegro-face-charges-relating-fraud-resulting-40b-losses), [CoinDesk sentencing report](https://www.coindesk.com/policy/2025/12/10/terraform-s-do-kwon-sentenced-to-15-years-in-prison-for-fraud)

**Official action:** DOJ: guilty plea Aug 2025, 15-year sentence Dec 2025; SEC: $4.5B fraud judgment Jun 2024