In a landmark case that has been closely watched by the global cryptocurrency industry, “crypto king” Do Kwon is scheduled to be sentenced today in a Manhattan federal court for misleading investors who collectively lost billions in the catastrophic collapse of his digital asset ecosystem in 2022.
Kwon, the co-founder of Terraform Labs, pleaded guilty to fraud charges in August following his extradition to the U.S. from Montenegro after months on the run.
The case centers on his company’s algorithmic stablecoin, TerraUSD (UST), and its sister cryptocurrency, Luna, whose implosion wiped out an estimated $40 billion in market value for holders worldwide.
The Collapse and the Charges
Terraform Labs had aggressively marketed its UST token as a reliable “stablecoin,” which was supposedly algorithmically pegged to the U.S. dollar to prevent drastic price fluctuations.
However, prosecutors argued that the stablecoin was an illusion built on deception that came “crumbling down,” triggering a “cascade of crises” that destabilized the broader crypto market.
The collapse, which occurred in May 2022, was the culmination of what authorities say was a fraudulent scheme that misled investors about the stability and integrity of the Terra ecosystem.
A Contested Sentence
Kwon, 33, faces a maximum potential sentence of 25 years in prison. However, both the prosecution and his defense team have submitted contrasting recommendations to the judge:
- Prosecutors’ Request: They have requested a prison term of 12 years, citing the “colossal” scope of the fraud and the sheer trail of financial destruction left in its wake. They did, however, take into account his guilty plea and the fact that he faces further prosecution in South Korea.
- Defense Request: Kwon’s attorneys have asked the court for a sentence of no more than five years, arguing that his conduct was not motivated by personal greed but rather by “hubris and desperation.”
In a letter to the judge, Kwon expressed remorse, writing: “I alone am responsible for everyone’s pain. The community looked to me to know the path, and I in my hubris led them astray.”
Precedent and Accountability
The sentencing of Do Kwon follows the conviction of other prominent crypto figures, including FTX founder Sam Bankman-Fried, who was sentenced to 25 years in prison earlier in 2024.
Kwon has already agreed to forfeit over $19 million as part of his plea deal and reached a separate $4.55 billion civil settlement with the U.S. Securities and Exchange Commission (SEC).
Today’s sentencing will be a pivotal moment for the industry, marking another major step by U.S. authorities to bring accountability to the high-stakes, largely unregulated digital asset market and deliver a measure of justice to the thousands of investors who lost their life savings in the Terra-Luna crash.
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