New York, December 13: Do Kwon, the South Korean cryptocurrency entrepreneur behind the spectacular collapse of the TerraUSD and Luna digital tokens in 2022, was sentenced on Thursday to 15 years in prison for what a U.S. judge described as an “epic” fraud that wiped out an estimated $40 billion in investor value.
U.S. District Judge Paul A. Engelmayer, handing down the sentence in Manhattan federal court, said Kwon repeatedly lied to ordinary investors who entrusted him with their savings. “This was a fraud on an epic, generational scale,” Engelmayer said. “In the history of federal prosecutions, there are few frauds that have caused as much harm as you have, Mr. Kwon.”
Kwon, 34, co-founded Singapore-based Terraform Labs and created TerraUSD, a so-called stablecoin designed to maintain a value of $1, and its sister token Luna. Prosecutors said he misled investors by falsely claiming a computer algorithm known as the Terra Protocol could stabilise TerraUSD during periods of market stress.
When TerraUSD slipped below its $1 peg in May 2021, Kwon told investors the algorithm had restored the price. Instead, prosecutors said, he secretly arranged for a high-frequency trading firm to buy millions of dollars of the token to artificially prop up its value.
Dressed in yellow prison clothing, Kwon apologised to the court and to the hundreds of victims who submitted statements describing devastating losses. “All of their stories were harrowing and reminded me again of the great losses that I’ve caused,” Kwon said. “I want to tell these victims that I am sorry.”
One investor, Ayyildiz Attila, said he lost between $400,000 and $500,000. “My savings, my future, and the results of years of sacrifice disappeared,” he said in a statement to the court.
Kwon pleaded guilty in August to conspiracy to defraud and wire fraud, after prosecutors initially charged him in January with nine criminal counts, including securities fraud, commodities fraud and money laundering conspiracy. Prosecutors had sought a prison term of at least 12 years, while Kwon’s lawyers asked for no more than five so he could return to South Korea to face charges there.
U.S. Attorney Jay Clayton said Kwon devised elaborate schemes to inflate the value of his cryptocurrencies and fled accountability when the fraud unravelled. Kwon’s lawyer, Sean Hecker, said his client expressed genuine remorse and would continue efforts to make amends.
The case is among the most prominent prosecutions to emerge from the 2022 downturn in digital asset markets, which exposed widespread misconduct and led to the collapse of several crypto firms.
In a related civil case, Kwon agreed in 2024 to pay an $80 million fine and accept a lifetime ban from cryptocurrency transactions as part of a $4.55 billion settlement with the U.S. Securities and Exchange Commission. He also faces criminal charges in South Korea.
Under the terms of his plea deal, U.S. prosecutors will not oppose Kwon’s potential transfer abroad after he serves half of his U.S. prison sentence.
