Do Kwon, a prominent figure in the cryptocurrency world, has been sentenced to 15 years in prison for his involvement in a massive fraud scheme that led to a staggering loss of $40 billion in just three years. The South Korean entrepreneur, aged 34, had pleaded guilty to conspiracy to defraud and wire fraud charges in a New York court. Kwon was the co-founder of Terraform Labs, which developed the cryptocurrencies TerraUSD and Luna, both of which were central to the catastrophic collapse in the market.
During the sentencing, U.S. District Judge Paul Engelmayer described Kwon’s actions as a “fraud of epic generational scale,” emphasizing that few cases in federal history have caused as much monetary harm as his. He imposed a sentence longer than the 12 years the prosecution had sought, stating that a lighter sentence would not adequately reflect the damage inflicted on victims.
The court heard arguments from the prosecution that Kwon’s fraudulent practices exacerbated the broader “crypto winter” that began in 2022, contributing significantly to the downfall of other cryptocurrency exchanges, including FTX, owned by Sam Bankman-Fried. Throughout the proceedings, Kwon acknowledged the adverse impact of his actions and took personal responsibility for the suffering they caused, stating that he had contemplated what he could have done differently to prevent the crisis.
Kwon’s legal team argued for a more lenient five-year sentence, asserting that his motivations were rooted in a desire to stabilize Terraform’s TerraUSD stablecoin rather than for personal enrichment. However, the judge described this request as “wildly unreasonable,” indicating that the severity of the consequences warranted a more serious punishment.
Since his extradition from Montenegro, where he was arrested for using a fraudulent passport, Kwon has been in U.S. custody. As part of his plea agreement, he has consented to forfeit $19.3 million and various properties linked to his fraudulent activities. Additionally, prosecutors have indicated they would support Kwon serving the latter part of his sentence in South Korea, where he faces further legal challenges, contingent on his adherence to the plea terms.
Despite the complexity of calculating losses, prosecutors decided against seeking restitution for investors, who collectively saw their investments diminish by $40 billion. Judge Engelmayer noted that some individuals remained loyal to Kwon even after his guilty plea, likening the correspondence he received from 315 investors worldwide to the letters of devoted followers in a cult. Many reported devastating financial losses, including their homes, retirement savings, and funds earmarked for education or medical expenses.
Kwon, a Stanford University alumnus, co-founded Terraform Labs in 2017 with Daniel Shin. Prosecutors detailed that when TerraUSD fell below its expected $1 peg in May 2021, Kwon misled investors by claiming that the “Terra Protocol” algorithm would restore its value. They alleged that he secretly enlisted a high-frequency trading firm to purchase millions of dollars worth of the token to artificially inflate its price, which misled both retail and institutional investors and significantly boosted the value of Luna, which was closely tied to TerraUSD, to $50 billion by early 2022.
Kwon’s case is part of a broader trend in which several cryptocurrency leaders are facing legal repercussions as the industry grapples with the fallout from declining digital asset prices and substantial company failures. Notably, Bankman-Fried, the founder of the largest U.S. cryptocurrency exchange, was sentenced to 25 years in prison in 2024 for his role in similar scandals.
