'Terra Incident' Kwon Do-hyung Admits Guilt, U.S. Sentence Reduced from Maximum 130 Years to 12 Years

U.S. prosecutors to recover $19 million, etc.

Possibility of extradition to Korea after serving time

Kwon Do-hyung, founder of Terraform Labs (photo), who has faced criminal trial in the United States on charges related to the issuance of the stablecoin TerraUSD (UST), has agreed to a significant reduction in his maximum sentence. This comes as he changed his stance and admitted guilt. There is now also a possibility that he will be extradited to Korea after serving a certain period of his sentence in the United States.

On the 11th, at a hearing held at the United States District Court for the Southern District of New York, Kwon admitted guilt to charges of conspiracy to commit fraud and wire fraud. Under the plea bargain (an agreement allowing sentence reduction or adjustment in exchange for an admission of guilt), prosecutors agreed to collect $19 million (about ₩26.2 billion) and other assets from Kwon. Previously, Kwon and Terraform Labs reached a settlement with the U.S. Securities and Exchange Commission (SEC) in a civil lawsuit, agreeing to pay $4.47 billion (about ₩6.1851 trillion) in disgorgement and fines.

The maximum combined sentence for conspiracy to commit fraud (5 years) and wire fraud (20 years), for which Kwon admitted guilt, is 25 years. Prosecutors, based on the plea bargain, decided not to file additional charges and to seek a maximum sentence of 12 years for Kwon. If Kwon serves half of his final sentence and complies with the plea bargain conditions, the U.S. Department of Justice will not oppose his application for the international prisoner transfer program.

Terraform Labs claimed that in issuing the stablecoin Terra, it was designed through the so-called 'Terra Protocol,' an algorithm intended to peg the currency to 1 U.S. dollar. However, there were suspicions that a trading company contracted with Terraform Labs intervened to artificially support the price of Terra. The U.S. Attorney's Office for the Southern District of New York prosecuted Kwon on nine counts, including conspiracy to manipulate the market. If convicted on all charges, Kwon could have faced up to 130 years in prison. While he had pleaded not guilty in court last January, on this day he said, "I deliberately agreed with others to commit fraud." Kwon’s sentencing hearing is scheduled for December 11.

Reporter Kim Joo-wan kjwan@hankyung.com