Remember, Do Kwon, the crypto mogul who was once hailed as one of the most pioneering figures in the blockchain realm? Well, for crypto insiders, they might have heard about Kwon and his Terraform Labs, which operated two cryptocurrencies — TerraUSD (UST) algorithmic stablecoin and Luna crypto — that finally nosedived in May 2022 following a disastrous loss of UST’s dollar peg. The crypto market ran mad in the wake of this event, losing over $400 billion in market cap!
And, now what’s trending about the crypto mogul? He has now pleaded guilty to $40 billion crypto collapse! And, probably many of us have repeatedly recalled the question: how a blockchain wizard ended up in shackled hands, and why did it happen?
The birth of a young crypto prodigy
Born in Seoul, the capital of South Korea, in 1991, Kwon Do-hyung, commonly known as Do Kwon, tested the blockchain waters with a degree in computer science in 2015. With experience working at tech giants Microsoft and Apple, Kwon returned to his home country, and launched Anyfi, a mesh-networking startup. This point in his life was a leap into the universe of blockchain technology.
Do Kwon follows the red carpet to the crypto realm
Do Kwon co-founded Terraform Labs along with Daniel Shin in 2018
Do Kwon’s true entry into the crypto world began in 2018, with applause from the industry. Why those big claps? Along with entrepreneur Daniel Shin, Kwon co-founded Terraform Labs in Singapore. Intention? To build a blockchain-based payment network powered by algorithmic stablecoins. As mentioned, Terraform Labs’ stablecoin UST and sister token Luna gained more traction following the launch.
Purpose of UST and Luna
Traditional stablecoins are backed by reserves like the US dollar; however, UST was pegged to the US dollar but kept an algorithmic connection with Luna. UST rewarded users with arbitrage opportunities at $1. And this key feature of the stablecoin attracted crypto enthusiasts, including high-profile investors. Reportedly, Mirror Protocol and Anchor Protocol were also a part of the investment.
Magical moment for the crypto wizard
As TerraUSD hooked over 40 million users at launch, establishing a strong presence in the stablecoin and DeFi sectors of blockchain. This opened a remarkable moment for Do Kwon as he got featured in Forbes’ 30 Under 30 Asia list in 2019.
Terraform Labs fall: An epoch etched in the history of crypto
Yes, May 2022 is a historic moment for the crypto world! Do Kwon’s Terraform Labs met a dead end! The stablecoin UST lost its peg to the US dollar, making the supply of sister token Luna inflate uncontrollably.
Millions of investors rushed to the scene, just to exit and protect their money! Unfortunately, the inflow of traders exiting triggered a chain reaction, leading to the value dip of both UST and Luna. Nearly $45 billion og both the crypto evaporated from the market in a matter of days!
The entire global market cap of crypto? — Approximately, $400–$500 billion shattered!
The investors went into panic, DeFi lending protocols faced crises, and a bit of confidence in algorithmic stablecoins dipped.
Following an Interpol Red Notice, South Korean authorities issued an arrest warrant in September 2022. Later in March 2023, the crypto wizard became a blizzard after his arrest in Montenegro. The US and South Korea requested for deportation, accusing him of wire fraud, securities fraud, commodities fraud, and conspiracy.
Guilty plea from Do Kwon
Last year, Montenegro authorities extradited Kwon to the US, and on August 12, 2025, he pleaded guilty to two criminal counts of fraud — conspiracy to commit wire fraud and securities fraud. The plea involves forfeiture of $19.3 million in assets.
Terra 2.0 and Terra USD Classic: A new version built aftermath
Following the fallout, Terraform Labs formed a new blockchain, Terra 2.0, and a new cryptocurrency, TerraUSD Classic (USTC). Despite an attempt to stabilize the $1 value, USTC stayed significantly lower than $1 peg. At press time, the stablecoin was trading at $0.01433.
And, lessons learned?
Every crypto crash teaches you a lot of good, golden nuggets. Terraform Labs’ cataclysm has these key points to tell you.
- Diversify your assets- do not invest in a single coin or asset
- DYOR- Do your own research on tokenomics, isks, and governance.
- Stay skeptical of exaggerated promises.
- Use cold storage- keep your significant crypto holdings offline from the internet to protect against hacks.
Volatility is a part of crypto’s DNA —you can’t take it out! Risks can also loom in. All you need to do is stay cautious, learn from mistakes, and avoid leaping into a project without knowing whereabouts. When Do Kwon started his crypto journey, no one imagined he would end up behind bars, with his ambitious goals smashed and buried. That’s the reality of the world we imagine! And, do not worry, crypto is not always about mishaps, frauds, and hacks. Millions of traders make millions of dollars out of crypto trading!
