One Year in Prison for $2.66 Billion: How the Cryptocurrency Monster Was Tried in the U.S. 0 7

The co-founder of the cryptocurrency company Terraform Labs has been sentenced to 15 years in prison: a U.S. court determined that his $40 billion stablecoin ecosystem was built on fraud.

The disgraced 34-year-old cryptocurrency mogul Do Kwon was convicted of fraud that wiped out $40 billion (€34.1 billion) in value, harmed charities, and drove some investors to the brink of suicide.

Kwon, a Stanford graduate who was referred to by some as the "king of cryptocurrency," apologized after hearing the accounts of victims — one in court and others by phone — about how his scheme deprived them of their savings and completely destroyed their retirement funds.

Judge Paul A. Engelmayer stated during a full-day session in federal court in Manhattan that the 12 years recommended by the prosecution was "unduly lenient," while the defense's request for five years was "utterly inconceivable and outrageously unreasonable."

Kwon faced a maximum of 25 years in prison. "Your crime caused real people to lose $40 billion of real money, not some paper losses," Engelmayer told Kwon, who sat at the defense table in a yellow prison jumpsuit.

In August, Kwon pleaded guilty to fraud charges related to the collapse of Terraform Labs, the Singapore-based company he co-founded in 2018. The losses exceeded the combined damage from the frauds of FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood, the prosecution stated.

According to Engelmayer, the number of victims could reach a million.

At Terraform Labs, TerraUSD was promoted as a reliable "stablecoin" — a type of digital currency typically pegged to stable assets or currencies to avoid sharp price fluctuations.

But, prosecutors said, this was an illusion supported by external cash infusions that collapsed when the price fell sharply below the pegged level of $1.

The crash devastated investors in TerraUSD and its floating "sister" currency Luna, triggering a "cascade of crises that swept through the cryptocurrency markets."

According to prosecutors, Kwon attempted to revive Terraform Labs in Singapore before fleeing to Montenegro with a fake passport — a coastal country in the Balkans.

He was arrested there in March 2023; the 17 months spent in prison before extradition to the U.S. will be credited toward his sentence.

As part of a plea deal, Kwon agreed to forfeit more than $19 million (€16.2 million). His lawyers argued that his actions were driven not by greed but by overconfidence and desperation.