Do Kwon, the South Korean cryptocurrency entrepreneur whose digital tokens collapsed and wiped out an estimated 40 billion dollars in 2022, has been sentenced to 15 years in prison in the United States for what the judge called an “epic fraud”.
Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital tokens that crashed and wiped out an estimated 40 billion dollars in 2022, was on Thursday sentenced to 15 years in prison for what a judge described as an “epic fraud”.
US District Judge Paul A. Engelmayer delivered the sentence in Manhattan federal court and sharply criticised Kwon for deceiving ordinary investors who had trusted him with their savings.
“This was a fraud on an epic, generational scale. In the history of federal prosecutions, there are few frauds that have caused as much harm as you have, Mr Kwon,” the judge said.
Terraform Labs collapse
Kwon, 34, co-founded Singapore-based Terraform Labs and created the TerraUSD and Luna cryptocurrencies. He pleaded guilty and admitted misleading investors about a coin that was supposed to maintain a stable price during periods of market volatility.
He is one of several cryptocurrency figures to face federal charges after the 2022 crash in digital asset prices led to the downfall of multiple firms.
Wearing yellow prison clothing, Kwon apologised to his victims, including hundreds who had submitted letters describing the losses they suffered. “All of their stories were harrowing and reminded me again of the great losses that I’ve caused. I want to tell these victims that I am sorry,” he told the court.
Victims said the collapse destroyed savings, wiped out retirement funds and harmed charities. One wrote that he had contemplated suicide after his father lost his retirement money in the scheme.
Judge calls sentence recommendations lenient
Judge Engelmayer rejected both the government’s recommendation of 12 years, calling it “unreasonably lenient”, and the defence’s request for five years, describing it as “utterly unthinkable and wildly unreasonable”. Kwon had faced a maximum of 25 years.
“Your offence caused real people to lose 40 billion dollars in real money, not some paper loss,” the judge said, adding that Kwon had an “almost mystical hold” over investors and that the case amounted to “a fraud on an epic, generational scale”.
Prosecutors said the losses from Terraform Labs’ collapse exceeded those from the frauds involving FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood combined. The judge estimated that up to a million people may have been affected.
‘Stablecoin’ illusion and global flight
Terraform Labs had marketed TerraUSD as a “stablecoin”, typically pegged to a stable asset to prevent sharp fluctuations. Prosecutors said it was actually propped up by outside cash infusions and collapsed after falling far below its one-dollar peg, triggering a wider crisis in the crypto market.
After the crash, Kwon attempted to rebuild Terraform Labs in Singapore before fleeing to the Balkans using a false passport, prosecutors said. He has been held since his arrest in Montenegro in March 2023 and was credited for the 17 months he spent in jail there before being extradited to the United States.
Forfeiture and apology
As part of his plea deal, Kwon agreed to forfeit more than 19 million dollars. His lawyers argued that his actions stemmed from hubris and desperation rather than greed. Judge Engelmayer rejected Kwon’s request to serve his sentence in South Korea, where he also faces prosecution and where his wife and young daughter live.
Kwon told the court he had spent years reflecting on what he should have done differently and how he might make amends. Hearing from victims, he said, was “harrowing” and reminded him “again of the great losses that I have caused.”
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