The person behind one of cryptocurrency’s most devastating collapses will spend the next decade and a half behind bars. Do Kwon, co-founder of Terraform Labs, received a 15-year prison sentence on Thursday for orchestrating what a federal judge called a fraud of “epic, generational scale”.
Do Kwon misled investors about TerraUSD (UST), an algorithmic stablecoin designed to maintain a $1 peg to the U.S. dollar. When UST briefly dropped below its peg in May 2021, he falsely claimed that the Terra Protocol’s algorithm had automatically resolved the issue.
The scheme collapsed spectacularly in May 2022, erasing roughly $50 billion in days. Victims who testified described losing retirement savings, homes, and family businesses.
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Court papers showed that he had secretly set up a high-frequency trading company to buy millions of dollars’ worth of UST, which made the price go up and restored the peg.
Judge Paul Engelmayer rejected the defence’s request for a lighter punishment after hearing extensive victim testimony. Kwon, who pleaded guilty to conspiracy and wire fraud charges, apologised in court, though his remorse came years too late for those who lost everything.
The South Korean national must serve at least half his sentence before potentially transferring to his home country, where additional charges await. His case joins those of other crypto executives like Sam Bankman-Fried, who’s now serving 25 years for the FTX collapse.
