In the Federal Court of Manhattan, New York, a highly followed cryptocurrency lawsuit has reached a critical turning point. Terraform Labs founder Do Kwon admitted to multiple serious charges on August 12, 2025, including telecommunications fraud, securities fraud, and commodity fraud. This guilty plea is directly related to the shocking collapse of TerraUSD (UST) and Luna (LUNC) in 2022, which resulted in massive losses of about $40 billion for investors.

The legal consequences faced by Quan Dao Heng are quite severe. The prosecution has recommended a prison term of 12 years, but it could be as high as 25 years. In addition, he has also agreed to pay a fine of over 19 million USD and to forfeit any profits derived from Terraform Labs and its crypto assets. The final verdict will be announced on December 11, 2025.

The impact of this case goes far beyond the personal level; it marks an important milestone in the regulation of the Crypto Assets industry. Regulatory agencies may strengthen their scrutiny of algorithmic stablecoins, and investors' awareness of the risks associated with Crypto Assets will also deepen. From a legal perspective, this case provides important references for the handling of similar cases in the future, helping to clarify the legal boundaries of fraudulent activities in the Crypto Assets field.

It is worth mentioning that Kwon Do-hyung's legal troubles did not begin today. He was arrested in Montenegro in March 2023 for using a forged passport and was subsequently extradited to the United States in December 2024. During this time, he also reached a civil settlement with the U.S. Securities and Exchange Commission (SEC), paying an $80 million fine and being banned from engaging in cryptocurrency trading.

As Terraform Labs applies for bankruptcy protection, its remaining assets will be used to compensate the victims. This series of events not only reveals the potential risks existing in the Crypto Assets industry but also highlights the urgency of establishing a sound regulatory system. In the future, the Crypto Assets market may face a stricter regulatory environment, and industry participants need to pay more attention to compliance operations in order to rebuild investor confidence.