Do Kwon to Be Sentenced in New York for $40 Billion Crypto Collapse
Terraform Labs founder Do Kwon faces sentencing in New York for his role in the $40 billion crypto collapse of TerraUSD after admitting he misled investors.
Key Points
Do Kwon, the cryptocurrency developer whose TerraUSD and Luna projects unraveled in 2022 and erased an estimated $40 billion in value, is scheduled to be sentenced on Thursday in federal court in Manhattan. The case marks one of the most prominent prosecutions tied to the digital asset turmoil that swept through the industry two years ago.
Kwon, 34, co-founded Terraform Labs and led the design of TerraUSD, a token promoted as a stablecoin meant to hold a steady value even during market swings. He later acknowledged in court that he misrepresented how the coin maintained its price and admitted to misleading investors about the technology behind it. Prosecutors say those assurances concealed practices that artificially supported TerraUSD’s value during moments of stress.
Sentencing Request and Charges
U.S. District Judge Paul A. Engelmayer will preside over the sentencing hearing, which begins at 11 a.m. in New York. Federal prosecutors argue that Kwon’s conduct fueled one of the largest losses in crypto history and have asked the court to impose a prison term of at least 12 years.
Kwon’s legal team has urged the judge to impose no more than five years, saying he intends to return to South Korea afterward to address pending charges there.
Earlier this year, the U.S. Department of Justice charged Kwon with nine criminal counts, including securities fraud, wire fraud, commodities fraud, and a money-laundering conspiracy. The case centers on statements Kwon made in 2021, when TerraUSD began losing its $1 peg. At the time, Kwon claimed that the blockchain algorithm known as the “Terra Protocol” had stabilized the coin.
What Prosecutors Say Actually Happened
Court filings state that rather than relying solely on the algorithm, Kwon enlisted a high-frequency trading firm to buy large quantities of TerraUSD in secret to push the token back toward $1. That intervention, which prosecutors say effectively masked failing mechanics in the stablecoin’s design, was never disclosed to investors.
In August, Kwon pleaded guilty to conspiracy to defraud and wire fraud, admitting that his public statements about TerraUSD’s recovery were incomplete and misleading.
“I failed to disclose the role of a trading firm in restoring the peg,” Kwon said at the hearing. “My statements were false, and I accept responsibility.”
Civil Penalties and Future Proceedings
Kwon also reached a major civil resolution in 2024 with the U.S. Securities and Exchange Commission. Under the settlement, Kwon and Terraform Labs agreed to pay $4.55 billion, including $80 million personally, and he accepted a prohibition from participating in crypto-related activities.
South Korean authorities have separately charged Kwon in connection with the same events. As part of his plea agreement in the United States, prosecutors said they would not oppose a request for Kwon to transfer abroad after completing half of whatever sentence the judge imposes.
