Do Kwon, the co-founder of Terraform Labs, is seeking a U.S. prison sentence of no more than five years for his involvement in the $40 billion collapse of the TerraUSD stablecoin and Luna cryptocurrency in 2022. Kwon's request comes as he faces potential extradition to South Korea, where prosecutors are pursuing a separate case tied to the same events, potentially leading to a 40-year prison sentence.
Kwon pleaded guilty in August to conspiracy and wire fraud charges in a New York federal court, avoiding a trial. He was extradited to the United States from Montenegro in December 2024, where he had been detained for using falsified travel documents. Kwon had been on the run for months following the collapse of TerraUSD and Luna, which triggered massive losses for investors worldwide.
In a recent court filing, Kwon's lawyers argued that a longer sentence in the U.S. would be excessive, considering the punishment he has already served and the penalties he has agreed to accept. They highlighted that Kwon has spent nearly three years behind bars, including time in "brutal conditions" in Montenegro. The defense team further asserted that anything beyond five years would be "far greater than necessary" to achieve justice.
As part of his plea agreement, Kwon has agreed to forfeit more than $19 million and several properties. U.S. prosecutors have agreed not to seek a sentence longer than 12 years. However, if convicted of all charges initially brought against him, Kwon could have faced a maximum penalty of 130 years in prison. He initially pleaded not guilty to nine counts, including securities fraud, wire fraud, and money laundering conspiracy, before changing his plea in August.
The U.S. Securities and Exchange Commission (SEC) also sued Do Kwon for multiple violations. The SEC accused Kwon of a fraudulent scheme to mislead investors, painting UST as stable while secretly colluding with a third party to buy massive amounts of UST to restore the peg a year before the crash happened in May 2021. They were also accused of selling unregistered securities and security-based swaps.
Following his U.S. sentencing, Kwon's legal troubles will continue in South Korea. South Korean prosecutors are pursuing a separate case tied to the TerraUSD and Luna collapse, seeking a prison sentence of up to 40 years. It remains uncertain whether Kwon will serve his sentence in the U.S. before potentially being extradited to South Korea.
Kwon is scheduled to be sentenced by U.S. District Judge Paul Engelmayer in Manhattan on December 11. Prosecutors are expected to submit their own sentencing recommendation in the coming days.
The collapse of TerraUSD and Luna had a devastating impact on the cryptocurrency market, erasing approximately $40 billion and causing significant losses to investors worldwide. The incident triggered increased regulatory scrutiny of the crypto industry and a growing list of high-profile cryptocurrency prosecutions.
