Yeliz Akmaca 
Do Kwon, co-founder of Terraform Labs, was sentenced to 15 years in prison following the collapse of the digital currencies TerraUSD and Luna. U.S. District Judge Paul Engelmayer in the Southern District of New York ruled that Kwon misled investors, causing massive financial losses. Court documents indicate his actions led to approximately $40 billion in losses, affecting thousands of investors.
Kwon pleaded guilty to charges of fraud and conspiracy to commit wire fraud. Engelmayer noted that when UST lost its peg in May 2021, Kwon falsely claimed that an algorithm had restored its value, while secretly arranging for a trading firm to purchase millions of dollars in UST to artificially inflate its price. The judge also criticized Kwon’s mocking behavior on social media, citing a Twitter post where he belittled investors.
Court Proceedings and Kwon’s Flight Attempts
During the trial, Engelmayer reviewed Kwon’s attempts to evade the law. Kwon traveled on false passports to Serbia and Montenegro before being caught en route to Dubai. The court described this as “despicable,” especially since he publicly encouraged retail investors to hold UST while he and close associates exited their positions.
Following the sentencing, Jay Clayton, head of the Southern District of New York for the U.S. Department of Justice, stated: “Do Kwon devised complex schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit. Once exposed, he conducted a deceptive PR campaign, laundered proceeds from illegal schemes, and attempted to seek political protection abroad. Fraud is fraud, and our office will relentlessly pursue justice for investors, regardless of where perpetrators flee.”
In August, Kwon admitted to conspiring to commit commodities fraud, securities fraud, and wire fraud connected to Terraform Labs’ operations. In court, he acknowledged that he knowingly participated in a plan to defraud UST buyers. Kwon also expressed remorse: “I want everyone to know I have spent all my time thinking about what I could have done differently and what I can do now. It has been four years since the incident, and I haven’t seen my family in three. I want to serve my restitution in my own country.”
Investors and Legal Implications
Judge Engelmayer deemed the defense’s requested five-year sentence “utterly unreasonable.” He said even the government’s suggested 12-year term would not sufficiently deter Kwon or future fraudsters.
Factors considered in the court’s decision included:
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Total funds lost and number of victims
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Kwon’s attempts to evade the law
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Misleading and mocking conduct on social media
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Deceiving investors while protecting personal positions
The Terraform collapse is now recorded as one of the largest scandals in crypto history, and Kwon’s sentence sets a significant precedent for the digital asset industry.
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