Do Kwon, the founder of Terraform Labs, has been sentenced to 15 years in prison in the US for his role in the 2022 Terra ecosystem collapse, which caused approximately $40 billion in losses in the crypto market. The verdict was announced on Thursday in the Federal Court for the Southern District of New York, exceeding the 12-year sentence requested by prosecutors.
Do Kwon's sentence determined
US District Judge Paul A. Engelmayer emphasized during the hearing that Do Kwon knowingly misrepresented investors. According to reports from the courtroom, Engelmayer stated that Kwon "chose to lie" and that the consequences of this choice were severe. The prosecution had requested a long prison sentence, citing both the scale of the fraud and Kwon's past conduct. Kwon's lawyers argued that the sentence should be limited to a maximum of five years.
Do Kwon, in March 2023; He faced numerous charges, including electronic fraud, securities fraud, commodity fraud, market manipulation, and conspiracy to launder money. In August, however, he reached a plea agreement with the prosecution, admitting to only two charges: electronic fraud and conspiracy to commit fraud. Without this agreement, Kwon could have theoretically faced up to 135 years in prison if convicted on a total of nine charges. After the agreement, the upper limit was set at 25 years. The process leading to the case began with the collapse of the algorithmic stablecoin TerraUSD (UST). UST aimed to maintain price stability through algorithms and market incentives, working in conjunction with Terra's native token, LUNA. However, the mechanism proved unsustainable, and in 2022, UST lost its dollar peg, leading to a rapid devaluation of LUNA. This collapse triggered a chain reaction crisis that resulted in the bankruptcy of many cryptocurrency companies. The prosecution argued that Kwon made misleading statements to investors about the risks of the system during this process. Kwon's legal battle was not limited to the US. Arrested in Montenegro in March 2024 with forged travel documents, Kwon faced arrest warrants from both the US and South Korea. Following extradition discussions between the two countries, Kwon was extradited to the US in December 2024. According to the court ruling, Kwon can apply for transfer to South Korea after serving at least half of his sentence in the US. The approximately 17 months he spent in detention in Montenegro will be deducted from his sentence. Meanwhile, Terraform Labs also faced significant financial sanctions. The company had previously reached a $4.55 billion settlement with the US Securities and Exchange Commission (SEC), additionally accepting an $80 million civil fine. Market reaction to the decision was swift. Terra LUNA and Terra Classic (LUNC) tokens lost more than 10% of their value, while TerraClassicUSD (USTC) experienced a drop of more than 20%.
