- Do Kwon gets 15 years for the $40B Terra crash, proving crypto scams have serious consequences.
- He tricked investors by making UST look stable while secretly propping it up with outside cash.
- People lost life savings, with Terra’s collapse hitting harder than FTX or OneCoin scams.
Former CEO and co-founder of Terraform Labs, Do Hyeong Kwon, has been sentenced to prison for a long time after running one of the biggest crypto scams ever. Yesterday, a court in Manhattan sentenced him to 15 years in U.S. federal prison for his part in the $40 billion crash of TerraUSD (UST) and its sister token Luna back in May 2022.
The case follows months of intense legal battles after Kwon admitted in August that he committed wire fraud and conspired to commit fraud involving securities and commodities. The judge handed down a sentence much harsher than the 12 years prosecutors asked for and far above the five years Kwon’s own lawyers wanted.
U.S. District Judge Paul A. Engelmayer rejected the defense argument that Kwon acted out of “hubris and desperation” rather than greed. He emphasized the real-world impact, stating the fraud caused “real people to lose $40 billion in real money.”
Victims testified about losing life savings, highlighting the human cost of Kwon’s deception. Prosecutors also stressed that the Terra collapse inflicted larger losses than high-profile cases involving Sam Bankman-Fried of FTX and Karl Sebastian Greenwood of OneCoin.
The Mechanics Behind the Collapse
Do Kwon tricked investors by claiming that UST was a stablecoin that could always stay close to $1. In reality, UST’s value depended on a complicated system with Luna that was supposed to balance itself out. But Kwon secretly pumped in outside money to keep UST’s price steady, especially in May 2021.
This helped him draw billions of dollars in investments and created the appearance that the system was functioning—until May 2022, when the system ultimately failed. In addition, Kwon was detained in Montenegro in March 2023 using a fictitious passport, extradited to the United States, and consented to surrender over $19 million in illicit earnings.
