TerraUSD Founder Do Kwon Gets 15-Year US Prison Sentence for US$40 Billion Crypto Fraud Collapse

Do Kwon Sentenced to 15 Years for US$40 Billion Crypto Collapse

Do Kwon, the South Korean cryptocurrency executive behind the dramatic US$40 billion collapse of TerraUSD and Luna in 2022, has been sentenced to 15 years in a New York federal prison. The 34-year-old co-founder of Singapore-based Terraform Labs faced judgment on Thursday (Dec 11) for charges of fraud and conspiracy, marking a significant moment in the crackdown on the volatile crypto market.

Guilty Plea and Misleading Investors

Kwon previously pleaded guilty to several charges, including conspiracy to defraud and wire fraud. In court, he admitted to misleading investors regarding TerraUSD, a so-called stablecoin designed to maintain a consistent US$1 value. Prosecutors detailed how Kwon, in May 2021, falsely claimed a computer algorithm had restored TerraUSD’s value after it slipped below its peg. In reality, he orchestrated a secret operation involving a high-frequency trading firm to buy millions of dollars of the token, artificially propping up its price.

During his August plea, Kwon expressed remorse, stating, "I made false and misleading statements about why it regained its peg by failing to disclose a trading firm's role in restoring that peg. What I did was wrong."

Legal Ramifications and Market Impact

The sentence, handed down by US District Judge Paul A Engelmayer in Manhattan, came after prosecutors sought a minimum of 12 years, emphasizing the devastating impact of Terra’s crash, which triggered widespread crises and billions in losses across the crypto market. Kwon's legal team had advocated for a sentence of no more than five years, hoping he could return to South Korea to address additional criminal charges there.

Kwon's case is one of several high-profile federal prosecutions against cryptocurrency magnates following a severe slump in digital token prices in 2022, which led to numerous company collapses. Beyond the criminal sentence, Kwon reached a US$4.55 billion settlement with the US Securities and Exchange Commission in 2024, agreeing to pay an US$80 million civil fine and be barred from future crypto transactions. As part of his plea agreement, prosecutors will not object to his potential transfer abroad after he serves half of his US sentence, allowing him to face justice in South Korea.