Do Kwon Sentenced for Major Cryptocurrency Fraud
Do Kwon, the South Korean entrepreneur behind two cryptocurrencies that witnessed a staggering $40 billion loss in 2022, was sentenced to 15 years in prison on Thursday for what was described by a judge as an “epic fraud.”
U.S. District Judge Paul A. Engelmayer criticized Kwon for misleading investors who entrusted him with their savings. He stated, “This was an epic, generational fraud. Mr. Kwon, there are very few frauds in the history of federal prosecution that have been as damaging as yours,” during the federal court hearing in Manhattan.
Kwon, the 34-year-old co-founder of Terraform Labs, which created the TerraUSD and Luna cryptocurrencies, previously pleaded guilty to deceiving investors regarding a coin that was intended to maintain a stable price amid the crypto market’s volatility.
He’s among several cryptocurrency figures facing federal charges following the dramatic drop in digital token values in 2022, which led many companies to collapse.
Wearing a yellow prison uniform, Kwon expressed remorse in court, addressing the victims, including hundreds who submitted letters detailing their losses. “All of their stories are tragic and remind me of the tremendous loss I have caused. I want to say to the victims that I am sorry,” he said.
One victim, Ayildis Attila, reported losing between $400,000 and $500,000 due to the collapse. He shared, “My savings, my future, and the results of years of sacrifice disappeared. I struggled to keep up with my payments and responsibilities, and everything I had worked for was erased.”
Following the verdict, Kwon’s attorney, Sean Hecker, mentioned that Kwon spoke genuinely and expressed true remorse, and would strive for redemption.
Manhattan U.S. Attorney Jay Clayton remarked that Kwon orchestrated a complex scheme to inflate cryptocurrency values and evade accountability when his misdeeds came to light.
Prosecutors sought a sentence of at least 12 years, citing that the collapse of Kwon’s Terra cryptocurrency caused billions in losses and triggered widespread crises in the market. Kwon’s legal team requested a maximum of five years so he could return to South Korea for additional charges.
Kwon faced nine counts from an indictment in January, including securities fraud, wire fraud, and money laundering conspiracy. Specifically, he was accused of misleading investors about TerraUSD, a stablecoin meant to maintain a value of $1. Prosecutors claimed that when TerraUSD dipped below this mark in May 2021, Kwon misled investors by stating that a computer algorithm had restored the coin’s value.
Contrary to his public claims, Kwon allegedly arranged for high-frequency trading companies to discreetly purchase millions of dollars in tokens to artificially raise prices, as outlined in charging documents.
In August, Kwon pled guilty to two counts of conspiracy to defraud and wire fraud, apologizing during the proceedings, admitting, “What I did was wrong.” In 2024, he agreed to pay $80 million in civil penalties and be banned from cryptocurrency trading as part of a larger $4.55 billion settlement with the U.S. Securities and Exchange Commission.
Kwon has also faced charges in South Korea. Under his plea agreement, prosecutors will not oppose extradition requests after Kwon completes half of his prison sentence in the U.S.
