Co-founder of Terraform Labs, Do Kwon, has been sentenced to 15 years in prison by a New York court for orchestrating a multibillion-dollar fraud that precipitated the downfall of his cryptocurrency enterprise in 2022. This legal outcome arises from actions deemed by U.S. District Judge Paul Engelmayer as “a fraud of epic generational scale,” which inflicted significant financial losses on investors.
Kwon, aged 34, evaded authorities for several months until his arrest in Montenegro in 2023 while attempting to travel on a fraudulent passport. The U.S. government engaged in a protracted legal process to extradite him, allowing him to face charges in a country where he still contends with legal issues. Following the completion of his U.S. prison term, Kwon is slated to face additional prosecution in South Korea.
The ruling comes at a time when regulatory scrutiny of the cryptocurrency sector has shifted, particularly following the recent pardon of Binance founder Changpeng Zhao by the Trump administration. Prosecutors argued that Kwon”s deceitful actions exacerbated the 2022 “crypto winter,” which contributed to the collapse of multiple firms, including FTX, founded by Sam Bankman-Fried, and others tied to notable figures such as Celsius CEO Alex Mashinsky and OneCoin promoter Karl Sebastian Greenwood.
In court, Kwon expressed remorse to victims and acknowledged his accountability, although his legal team had previously sought a reduced sentence of no more than five years, asserting that his intentions were to stabilize the TerraUSD rather than defraud investors. This plea was dismissed by the judge as “wildly unreasonable.” Kwon had earlier pleaded guilty to conspiracy and wire fraud, agreeing to forfeit $19.3 million alongside several properties.
Prosecutors indicated they would support Kwon serving the latter portion of his sentence in South Korea, contingent on his compliance with the plea agreement. However, they opted not to pursue restitution for the estimated $40 billion in investor losses due to the complexities in calculating claims. The downfall of Terraform Labs, established by Kwon and Daniel Shin in 2017, was triggered when TerraUSD lost its dollar peg in May 2022, leading to widespread market failures.
After nearly two years in detention in Montenegro, Kwon”s extradition proceedings have concluded, yet his legal troubles are far from over. In 2024, a civil jury in the U.S. found both Kwon and Terraform liable for securities fraud due to misrepresentations regarding TerraUSD”s stability and its purported integration with the Korean payments application Chai. With his U.S. sentence now imposed, Kwon”s future in South Korea remains uncertain as he prepares for further legal challenges.
