Do Kwon Sentenced to 15 Years Over TerraUSD and Luna Collapse That Wiped Out $40 Billion

• Terraform Labs co-founder Do Kwon has been sentenced to 15 years in prison for fraud tied to the collapse of TerraUSD and Luna.
• The judge called the case “a fraud of epic generational scale” and imposed a longer sentence than prosecutors sought.
• Kwon admitted responsibility, agreed to forfeit $19.3 million, and remains in US custody, with the possibility of serving part of his sentence in South Korea under a plea agreement.

Do Kwon, the co-founder of Terraform Labs, has been sentenced to 15 years in prison by a US federal court for fraud linked to the collapse of the TerraUSD and Luna cryptocurrencies, a failure that erased an estimated $40 billion in investor value and accelerated the 2022 crypto market crash.

Kwon, 34, pleaded guilty to conspiracy to defraud and wire fraud. US District Judge Paul Engelmayer delivered the sentence at a New York hearing, calling the case “a fraud of epic generational scale.”

The judge imposed a longer sentence than the 12 years requested by prosecutors, saying a lighter punishment would not reflect the magnitude of harm.

“In the history of federal prosecutions, very few cases have caused more monetary harm than you did,” Engelmayer said in court.

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Terraform Labs, founded by Kwon in 2017, created TerraUSD, an algorithmic stablecoin designed to maintain a one-dollar peg, and Luna, a related token used to support the system. Prosecutors said that when TerraUSD briefly slipped below its peg in May 2021, Kwon falsely told investors that an algorithm known as the Terra Protocol had restored stability.

Instead, prosecutors alleged, Kwon secretly arranged for a high-frequency trading firm to purchase large volumes of the token to artificially support prices. Those claims, they said, helped drive renewed investor confidence, pushing Luna’s market value to about $50 billion by early 2022 before the system collapsed.

Addressing the court, Kwon accepted responsibility for his actions.

“I don’t argue nor will I ever argue that my conduct was industry standard,” he said. “The blame should be pointed at me for everyone’s suffering.”

Kwon’s lawyers had sought a sentence of no more than five years, arguing that his actions were motivated by an effort to stabilize the project rather than personal gain. The judge rejected that argument as “wildly unreasonable.”

Kwon has been in US custody since his extradition from Montenegro last year, where authorities arrested him for using a forged passport. As part of his plea agreement, he agreed to forfeit $19.3 million and several properties prosecutors said were linked to the fraud.

Prosecutors said they would support Kwon serving part of his sentence in South Korea, where he also faces criminal charges, provided he complies with the terms of the plea deal. The court declined to order restitution for investors, citing the complexity of determining losses across millions of victims worldwide.

Editorial Note: This news article has been written with assistance from AI. Edited & fact-checked by the Editorial Team.

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