Kwon's guilty plea in a New York court comes after a lengthy legal battle.
He initially fled South Korea after a warrant for his arrest was issued in 2023, eventually ending up in Montenegro where he was arrested and jailed before being extradited to the US.
US prosecutors said Kwon misrepresented features that were supposed to keep the so-called stablecoin at $1 without outside intervention.
They alleged that in 2021, Kwon arranged for a trading firm to surreptitiously purchase millions of dollars worth of the token to restore TerraUSD's value, even as he told investors that a computer algorithm called Terra Protocol was responsible.
Prosecutors say the alleged misrepresentation prompted a wide array of investors to buy Terraform's offerings, which helped prop up the value of the company's Luna token, which was closely linked to TerraUSD.
The following year, Kwon's TerraUSD and the Luna cryptocurrency crashed.
"In 2021, I made false and misleading statements about why [TerraUSD] regained its peg," he said in court on Tuesday.
"What I did was wrong and I want to apologise for my conduct," he added.
Kwon had originally pleaded not guilty to nine counts stemming from the crash, including securities and wire fraud, and money laundering conspiracy.
He had faced up to 135 years in prison if convicted of the charges in the original indictment.
As part of his plea deal, Kwon agreed to refrain from challenging the allegations in the indictment.
He must also forfeit up to $19.3m plus interest and several properties and pay restitution.
While prosecutors have agreed to limit their requested sentence to 12 years, Judge Paul Engelmayer maintained that he was entitled to prescribe a longer sentence.
That sentence could be up to 25 years in prison.
He still faces charges in South Korea, according to his attorney.
