A former cryptocurrency entrepreneur has been sentenced to 15 years in prison for committing an extensive fraud that resulted in the collapse of two digital currencies, causing an estimated loss of $40 billion. Do Kwon, a South Korean national and co-founder of Singapore-based Terraform Labs, developed the now-failed TerraUSD and Luna digital coins, both of which played a significant role in the wider cryptocurrency market’s turmoil.
During a court hearing in Manhattan, Judge Paul A. Engelmayer characterized Kwon’s actions as an exceptional breach of trust. He stated, “This was a fraud on an epic, generational scale,” noting that very few fraud cases in federal history have inflicted as much damage. Kwon’s misleading statements about TerraUSD, a stablecoin intended to maintain parity with the US dollar, were particularly prominent, with the judge underscoring the deep impact of Kwon’s misrepresentations on investors.
Kwon had previously pleaded guilty to conspiracy to defraud and wire fraud. In a moment of accountability, he expressed remorse, stating, “I have spent almost every waking moment of the last few years thinking of what I could have done different and what I can do now to make things right.”
Prosecutors outlined that when TerraUSD fell below its intended $1 value in May 2021, Kwon deceived investors by falsely claiming that a computer algorithm would restore the coin’s value. Evidence presented in court revealed that he had secretly orchestrated transactions with a trading firm to purchase millions of dollars’ worth of TerraUSD to artificially inflate its price, further exacerbating the losses for unsuspecting investors.
This case is one among several in which cryptocurrency executives have faced legal repercussions following a significant downturn in the market in 2022. The fallout from these financial collapses raised serious questions about regulation and oversight in the rapidly evolving cryptocurrency landscape.
