A judge in New York sentenced a former cryptocurrency entrepreneur to 15 years in jail for a “epic” fraud. The entrepreneur was responsible for two digital currencies that failed and lost an estimated $40 billion (£29.9 billion).
South Korean Do Kwon was a co-founder of Terraform Labs, a Singapore-based company that created the digital currencies TerraUSD and Luna.
Kwon acknowledged deceiving investors about TerraUSD, a purported stablecoin that was meant to hold its value in relation to the US dollar.
He was one of numerous cryptocurrency executives charged in the US following the 2022 decline in digital tokens, which led to the demise of multiple businesses.
The Stanford graduate had frequently deceived to investors who trusted him with their money, according to US District Judge Paul A. Engelmayer, who imposed the punishment.
“This was a fraud on an epic, generational scale,” he declared at the Manhattan court hearing on Thursday.
“In the history of federal prosecutions, there are few frauds that have caused as much harm as you have.”
Kwon apologized to the judge after entering a guilty plea to conspiracy to defraud and wire fraud in August.
“I have spent almost every waking moment of the last few years thinking of what I could have done different and what I can do now to make things right,” he stated.
Prosecutors said that Kwon informed investors that a computer algorithm had restored the value of TerraUSD when it dropped below its $1 peg in May 2021.
Instead, according to court records, Kwon had arranged for a trading company to covertly purchase millions of dollars’ worth of the coin in order to artificially increase its value.
FAQ: Do Kwon Sentenced in $40 Billion Stablecoin Fraud Case
1. Who is Do Kwon?
Do Kwon is a South Korean entrepreneur and co-founder of Terraform Labs, the company behind the cryptocurrencies TerraUSD and Luna.
2. Why was Do Kwon sentenced?
He was sentenced for orchestrating an “epic” fraud involving the collapse of TerraUSD and Luna, which caused losses of around $40 billion. He deceived investors about how TerraUSD maintained its value.
3. What sentence did he receive?
A judge in New York sentenced Do Kwon to 15 years in prison for conspiracy to defraud and wire fraud.
4. What was TerraUSD supposed to do?
TerraUSD was marketed as a stablecoin designed to maintain a 1:1 value with the US dollar using an algorithm. However, this mechanism failed in 2021 and again catastrophically in 2022.
5. How did Do Kwon deceive investors?
Kwon falsely claimed that TerraUSD’s value recovered through algorithmic stabilization. In reality, he secretly arranged for a trading firm to buy millions of dollars’ worth of the coin to artificially prop up the price.
6. How big was the financial damage?
The collapse of TerraUSD and Luna wiped out an estimated $40 billion, causing widespread losses among global investors and triggering a broader crypto market crash.
7. Why is this case significant?
The judge called it a “fraud on an epic, generational scale,” one of the most damaging crypto frauds in U.S. history. It marked a major moment in the crackdown on crypto executives after the 2022 crash.
8. Did Do Kwon apologize?
Yes. After pleading guilty, Kwon apologized in court, saying he spent years reflecting on what he could have done differently to prevent the disaster.
9. What role did Terraform Labs play?
Terraform Labs created TerraUSD and Luna and promoted them as innovative financial products. Their failure led to the company’s downfall and triggered legal action in multiple countries.
10. What happens next in the case?
Do Kwon will begin serving his prison term, and ongoing investigations into the Terra ecosystem and related crypto entities continue in the U.S. and abroad.
