Do Kwon, the South Korean entrepreneur behind the collapse of two major cryptocurrencies that wiped out around $40bn in investor wealth, has been sentenced to 15 years in prison in the United States for fraud. The sentencing took place in New York, where the judge said Kwon’s actions amounted to “a fraud of epic generational scale”, The Guardian reported.
The 34-year-old had pleaded guilty to two charges – conspiracy to defraud and wire fraud. The judge imposed a sentence longer than the 12 years requested by prosecutors, saying that would have been “too lenient” given the scale of the harm. “In the history of federal prosecutions very few cases have caused more monetary harm than you did,” District Judge Paul Engelmayer told Kwon.
During the hearing, Kwon accepted responsibility for the losses suffered by investors. “I don’t argue nor will I ever argue that my conduct was industry standard and market practice,” he said. “If they were, they were bad industry standards and market practices and I as one of the market leaders should be personally responsible. The blame should be pointed at me for everyone’s suffering. I have spent almost every waking moment of the last few years thinking of what I could have done different and what I can do now to make things right.”
Who is Do Kwon?
Do Kwon is a Stanford University graduate who co-founded Singapore-based Terraform Labs in 2017 with business partner Daniel Shin. The company developed two closely linked cryptocurrencies — TerraUSD, a so-called stablecoin designed to maintain a $1 value, and Luna, a token whose price was tied to TerraUSD. At its peak, the Terraform ecosystem was valued at around $50bn and attracted both retail and institutional investors from across the world.
What are the crimes he committed?
Prosecutors said Kwon misled investors about how TerraUSD maintained its dollar peg. According to court filings cited by The Guardian, when TerraUSD slipped below $1 in May 2021, Kwon told investors that a computer algorithm known as the “Terra Protocol” had automatically restored its value. In reality, prosecutors said, Kwon secretly arranged for a high-frequency trading firm to buy millions of dollars worth of the token to artificially prop up its price.
They said this false claim, along with other misleading statements encouraged investors to pour more money into Terraform products, driving Luna’s market value to about $50bn by early 2022. When TerraUSD and Luna collapsed in 2022, around $40bn in value was wiped out, creating panic across the crypto market and contributing to the broader “crypto winter”. US authorities said the fallout also played a role in the later collapse of Sam Bankman-Fried’s FTX exchange.
Kwon’s lawyers had asked for a sentence of no more than five years, explaining that he was trying to save TerraUSD rather than enrich himself personally. Judge Engelmayer rejected that argument, calling the request “wildly unreasonable”, according to The Guardian.
No restitution for investors
As part of his guilty plea, Kwon agreed to forfeit $19.3m and several properties that prosecutors said were linked to the fraud. However, prosecutors said they would not seek restitution for the thousands of investors who lost money, arguing that calculating individual losses across the globe would be too complex.
The judge said he had received letters from 315 victims worldwide, many of whom reported losing their homes, retirement savings, medical funds and college money. He added that some investors continued to support Kwon even after his guilty plea, describing their messages as resembling “the words of cult followers”.
Kwon has been in US custody since his extradition from Montenegro last year, where he was arrested for travelling on a fake passport.
Prosecutors told the court they may support Kwon serving the second half of his sentence in South Korea, where he still faces charges, if he complies with the terms of his plea agreement. Kwon is among several high-profile crypto figures to face US federal charges following the 2022 market crash. Sam Bankman-Fried, the founder of FTX, was sentenced to 25 years in prison in 2024.