Do Kwon
Legal name: Kwon Do-hyung
Architect of the $40B Terra/Luna collapse
Case facts
- Region
- South Korea / Singapore / United States
- Estimated loss
- ~$40B in market value destroyed
- Victims
- Hundreds of thousands of retail crypto holders worldwide
- Filed
- Jun 3, 2026
Last reviewed .
Co-founder of Terraform Labs whose algorithmic stablecoin UST de-pegged in May 2022, wiping out an estimated $40 billion in 72 hours. Convicted of fraud-related charges in Montenegro; extradited to the United States to face SDNY charges.
The pitch
Terra's UST was marketed as a decentralized stablecoin maintained at $1 not by dollar reserves but by an arbitrage mechanism with its sister token LUNA. The accompanying Anchor Protocol offered a fixed 19.5% yield on UST deposits — a rate that was never sustainable from real on-chain demand.
How it broke
Between May 9 and May 12, 2022, a coordinated set of UST withdrawals broke the peg. The arbitrage mechanism flooded the market with newly-minted LUNA to defend $1. LUNA's supply hyperinflated from 350 million to 6.5 trillion tokens in three days. Both assets collapsed to near zero.
What the SEC alleges
- Kwon and Terraform misled investors about the stability of UST and the adoption of the Terra blockchain
- A 2021 prior de-peg was secretly resolved by an outside trading firm — and presented to the market as proof the algorithm worked
- Tokens were sold to US investors without registration
Criminal track
- March 2023 — arrested in Podgorica, Montenegro on passport-forgery charges
- 2024 — convicted in Montenegro; sentenced to 4 months for the passport offense
- 2024 — extradition order to the United States issued
- 2025 — pleaded not guilty in SDNY to nine counts including securities fraud, wire fraud, and commodities fraud
The takeaway
"Algorithmic stablecoin" is, in 2026, a synonym for "unbacked promise." Any stablecoin that maintains its peg through a reflexive mint-and-burn loop with a volatile sister token has the same structural flaw UST had. If the yield exceeds the risk-free rate by an order of magnitude, the yield is the bait.
Primary evidence
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