NEW YORK — Do Kwon, the co-founder of Terraform Labs, received a 15-year prison sentence on Wednesday for his involvement in a significant fraud scheme that erased approximately $50 billion from the crypto market within just three days in May 2022.
This sentence was issued by District Judge Paul Engelmeyer of the Southern District of New York (SDNY), which is slightly longer than the 12-year suggestion from prosecutors and significantly exceeds the five-year term recommended by Kwon’s attorneys. Kwon must serve at least half of his sentence before he can request a transfer to South Korea, where additional charges await him.
The sentencing came after a prolonged hearing where victims shared their experiences, both in-person and through phone calls, detailing the impact of Terra’s downfall on their lives and families.
Read more: Do Kwon’s Sentencing Hearing Prolonged as Court Considers Extensive Victim Testimony
In August, Kwon entered a guilty plea for one count each of conspiring to commit commodities fraud, securities fraud, and wire fraud, in addition to another wire fraud count related to deceptive practices at Terraform Labs. During his plea hearing, Kwon, a South Korean national, acknowledged that he “knowingly engaged in a scheme to defraud and did, in fact, defraud” buyers of the TerraUSD (UST) stablecoin.
Under Kwon’s guidance, Terraform Labs triggered the initial collapse in the 2022 crypto market, leading to a series of liquidations that culminated in the downfall of the once-powerful FTX in November 2022. The former FTX CEO, Sam Bankman-Fried, is currently serving a 25-year sentence for fraud linked to the exchange’s collapse, while Alex Mashinsky, founder of the now-bankrupt Celsius Network, is serving a 12-year term for fraud.
In return for Kwon’s guilty plea this summer, prosecutors reduced the original nine-count indictment, under which Kwon faced a potential 135-year sentence, to just two counts, with a maximum combined sentence of 25 years. Nevertheless, as part of the plea deal, prosecutors recommended a 12-year sentence and agreed to support Kwon’s motion for an international transfer back to South Korea after he serves half of his sentence.
The potential for Kwon’s transfer to his home country appeared to raise concerns for Engelmeyer, who asked in a court document prior to the sentencing what assurances the U.S. would have that Kwon would not be released before completing his prison term. Engelmeyer also sought clarity from both prosecutors and Kwon’s defense regarding whether he had pending criminal charges in South Korea and if he should receive credit for the 17 months he spent in custody in Montenegro before his extradition to the U.S. in January.
In a filed response to the court on Wednesday, prosecutors mentioned that they lacked information regarding the charges in South Korea; however, their counterparts there indicated they could not disclose the punishment they were seeking, but that it seemed Kwon would contest his charges.
The memo also stated that the Bureau of Prisons would credit Kwon for his time in a Montenegrin facility “in excess of the four-month period he served for his separate passport fraud crime” there, though the specifics of the credit he would receive remain undetermined.
