South Korean entrepreneur Do Kwon was sentenced to 15 years in prison for fraud related to his cryptocurrency company, Terraform Labs. Kwon, who appeared in court wearing a bright yellow jumpsuit, looked somber as he was escorted in by US Marshals.
In August, he pleaded guilty to charges after his company’s stablecoin, TerraUSD (UST), collapsed in May 2022. This event wiped out around $40 billion, shaking the entire crypto market and leading to many business failures. Prosecutors described Kwon’s actions as a massive deceit that affected countless investors.
During the hearing, Kwon took full responsibility for his actions. Emotional, he expressed gratitude to those who supported him, while his lawyers comforted him. Initially, prosecutors sought a 12-year sentence, but the judge, Paul Engelmayer, aimed for a stronger message against crypto fraud, stating, “To the next Do Kwon, if you commit fraud, you will lose your liberty for a long time.”
Kwon co-founded Terraform Labs in 2018 and launched UST two years later. The coin was intended to be stable, linked to the US dollar through an algorithm. If UST’s value dropped below $1, traders were meant to buy the associated coin, LUNA, to restore equilibrium. Initially, analysts considered this innovative. Noelle Acheson, a crypto expert, noted that many believed it could work.
However, when significant amounts of UST were sold off, the system faltered. Kwon attempted to intervene with a tweet during the chaotic sell-off, stating, “deploying more capital—steady lads,” but it was too late. Both UST and LUNA’s values plummeted.
This case reflects broader concerns in the crypto world. A recent study by Chainanalysis found that almost $1 trillion has been lost to crypto scams since 2021. As fraud continues to rise, experts warn that stronger regulations are needed to protect investors. With Kwon’s sentence, it sends a clear message: in the world of cryptocurrency, accountability is crucial.
For more on the impact of crypto fraud, check out the Chainalysis report.
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