NEW YORK — Former cryptocurrency entrepreneur Do Kwon was sentenced to 15 years in prison for fraud after the collapse of Terraform Labs, which led to investor losses of roughly $40 billion.
Manhattan Judge Paul A. Engelmayer rejected the defense’s recommended five-year sentence and the prosecution’s 12-year suggestion as too lenient, noting the maximum possible term was 25 years. The court concluded the downfall of the TerraUSD stablecoin and the Luna token was caused by deliberate deception, not market volatility.
Founded in 2018, Terraform Labs had developed the dollar-pegged TerraUSD stablecoin. Its apparent stability relied on hidden external financial inflows. When the stablecoin fell below its peg, the ecosystem collapsed, sparking a wider cryptocurrency crisis.
As part of Terraform’s bankruptcy, 16,500 claims were filed by affected investors, though the court indicated that the actual number of victims could approach one million. Prosecutors stated that total losses from this case exceed those of all previously recorded cryptocurrency-related fraud cases.
Kwon pled guilty to conspiracy to commit fraud and fraud using electronic communications. He agreed to forfeit more than $19 million and had previously settled with the U.S. Securities and Exchange Commission for $4.55 billion, which includes an $80 million civil penalty and a permanent ban from cryptocurrency transactions.
Following failed attempts to restart Terraform in Singapore, Kwon fled to the Balkans using a forged passport and was detained in Montenegro in March 2023, serving 17 months credited toward his U.S. sentence. A request to serve his sentence in South Korea was rejected.
During hearings, dozens of victims testified, describing devastating financial and personal consequences. One investor recounted losing savings that led to divorce, children unable to attend college, and moving back in with parents. Letters submitted to the court reported individual losses ranging from $400,000–$500,000, with nonprofits losing over $2 million and a church community about $900,000.
Assistant U.S. Attorney Sara Mortazavi summarized the prosecution’s stance: Kwon concealed systemic failure and manipulated investors, committing fraud with “contempt for people.”
