Simply put
- Do Kwon was sentenced to 15 years in prison.
- He pleaded guilty in August to a series of fraud charges.
- Mr. Kwon wore a yellow jumpsuit in court and expressed his remorse.
Terraform Labs founder Do Kwon received a 15-year prison sentence on Thursday due to the $40 billion collapse of UST and Luna over three years ago.
Prior to sentencing, U.S. District Judge Paul Engelmayer remarked that the figures involved were “eye-opening,” even within the context of New York’s Southern District, known for handling some significant financial crimes.
Kwon, who is 33 and from South Korea, had previously pleaded guilty. Judge Engelmayer described Kwon’s actions as an “unusually serious” fraud, stating, “You chose to lie.”
In his comments on X, previously known as Twitter, Kwon discussed “putting in more capital – solid young people,” which Judge Engelmayer emphasized had a detrimental impact on investors. He also pointed out Kwon’s statement, “We don’t discuss the poor.”
Judge Engelmayer drew a parallel between Kwon and a cult leader, exploiting the trust of his victims. The sentence was delivered in a Manhattan courtroom, where victims shared how the collapse of Terra’s ecosystem has impacted them.
A man from Ukraine explained that Kwon’s algorithmic stablecoin failed in May 2022, resulting in his personal loss of nearly $200,000. He conveyed that Kwon’s assurances led him to believe his 17 years of savings were “safe.” Yet, there was still a risk that Terra’s yield might reach 20%.
The judge noted Kwon’s deep involvement in cryptocurrency, suggesting that without the guilty plea, the sentence would have been more severe. He mentioned that Kwon’s letter was beautifully written and he hoped it would be shared with his daughter someday.
Federal prosecutors requested a 12-year prison sentence for Kwon, arguing that he created a financial framework based on deceit. He utilized manipulative tactics to mislead investors regarding various aspects of Terraform’s operations.
Kwon’s attorney requested a five-year sentence instead. As part of his plea deal, Kwon will forfeit $19 million along with some of his assets.
In a yellow jumpsuit, Kwon conveyed regrets to Judge Engelmayer, taking responsibility for the suffering caused by his actions. “The blame should be on me,” he expressed. “I didn’t operate the system the right way, and I want to prevent other crypto founders from being where I am now.”
He also noted that it was his first opportunity to see his family in three years and expressed a wish to serve part of his sentence in South Korea. Prosecutors agreed to this arrangement, allowing Kwon to complete the latter half of his sentence in his home country.
Before the sentencing, Judge Engelmayer expressed dissatisfaction with the prosecution’s presentation of numerous letters from the Terra community, leading to the cancellation of a “celebratory event” due to the overwhelming response.
The collapse of Terra’s ecosystem was a significant moment for the industry in 2022, contributing to FTX’s bankruptcy shortly thereafter. Instead of being backed by liquid assets, Terra’s UST stablecoin relied on trading incentives, which ultimately failed.
Last April, Terraform Labs and Kwon were found liable for civil fraud. A settlement with the U.S. Securities and Exchange Commission resulted in an agreement to pay $4.5 billion, after which the company moved to dissolve.
At that time, Kwon was detained in Montenegro following a protracted extradition battle. He had been arrested the previous year while attempting to travel with a fake passport.
