A US court yesterday (Thursday) sentenced Do Kwon, the co-founder of Terraform Labs, to 15 years in prison after he pleaded guilty to wire fraud and conspiracy to defraud investors. The collapse of Terraform Labs wiped out $40 billion in investors’ money.
Another Crypto Mogul Goes to Prison
According to the order of Judge Paul Engelmayer at the US District Court for the Southern District of New York, Kwon will receive credit for time served in the US and 17 months of pre-extradition custody.
Before the sentencing, the judge also heard from some of the victims of Terraform. Kwon also testified in court before the sentencing.
“I would like everyone to know that I have spent all my time thinking about what I could have done, and what I can do,” Kwon said before the sentencing. “It’s been four years since the crash, three years since I’ve seen my family. I’d like to [do] my penance in my home country.”
He is also facing fraud charges in South Korea, his home country.
The Collapse that Dented the Crypto Industry
Kwon was known for founding Terraform Labs. However, the project’s two cryptocurrencies, TerraUSD and Luna, collapsed in 2022, erasing about $37 billion in value. The fall of the algorithmic stablecoin led to the closure and downfall of several other cryptocurrency companies.
In 2023, Kwon and an associate were arrested in Montenegro while trying to travel to Dubai using fake travel documents. He was then extradited to the US, while South Korea was also trying to push his extradition.
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In June, Terraform Labs and Kwon agreed to a settlement with the US Securities and Exchange Commission (SEC), committing to pay around $4.5 billion in recovery and civil penalties. Kwon personally agreed to pay at least $204.3 million.
At first, the US regulator sought $5.3 billion in settlement. However, the defendants’ legal team countered with an offer of $1 million in civil penalties and no recovery or injunction.
Additionally, Kwon and Terraform Labs were permanently banned from buying or selling crypto asset securities, including tokens in the Terra ecosystem.
Earlier this year, Terraform Labs filed for bankruptcy in Delaware, United States. In the court filing, the defunct company reported liabilities between $100 million and $500 million, with estimated assets in the same range.
After the sentencing, Kwon joined FTX founder and former CEO Sam Bankman-Fried, who received a 25-year prison sentence.
