A U.S. federal judge has sentenced Do Kwon, the former crypto entrepreneur behind the collapse of two major digital currencies, to 15 years in prison for fraud tied to losses estimated at $40bn (£29.9bn).
Court Ruling and Sentencing Details
Kwon, a South Korean national and co-founder of Singapore-based Terraform Labs, was sentenced on Thursday by U.S. District Judge Paul A Engelmayer in Manhattan. The judge said Kwon had repeatedly misled investors and described the case as one of the most damaging frauds brought before U.S. courts.
Judge Engelmayer said the Stanford University graduate had lied to investors who trusted him with large sums of money. He told the court that the scale of the deception placed the case among the most harmful financial fraud prosecutions in U.S. history.
Kwon pleaded guilty in August to conspiracy to defraud and wire fraud.
Collapse of TerraUSD and Luna
Terraform Labs developed TerraUSD and Luna, two digital currencies that collapsed in 2022 during a broader downturn in the cryptocurrency market. TerraUSD was designed as a stablecoin, intended to maintain a one-to-one value with the U.S. dollar.
Prosecutors said Kwon falsely assured investors that an algorithm had stabilized TerraUSD after it fell below its $1 peg in May 2021. Court documents state that instead of relying on the algorithm, Kwon arranged for a trading firm to secretly purchase millions of dollars’ worth of TerraUSD to artificially support its price.
The collapse of TerraUSD and Luna contributed to wider losses across the crypto sector and preceded the failure of several other digital asset firms.
Statements From the Defendant
During the sentencing hearing, Kwon addressed the court and expressed remorse. He said he had spent much of the past several years reflecting on his actions and considering how he could make amends.
U.S. prosecutors said Kwon’s actions were part of a broader pattern of deception that misrepresented the stability and reliability of Terraform Labs’ products to investors.
Featured image credits: Pickpik
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