Terraform Labs co-founder Do Kwon has received a 15-year federal prison sentence, concluding a case that stemmed from the collapse of the TerraUSD (UST) stablecoin.
The collapse wiped out an estimated $50 billion in market value within three days and triggered a chain of events that reshaped the digital-asset sector. The sentence, issued by District Judge Paul Engelmeyer of the Southern District of New York, exceeded the 12-year term recommended by prosecutors and was higher than the five-year sentence sought by Kwon’s legal team. Under federal rules, Kwon must serve at least half of the imposed term before he may request a transfer to South Korea, where he faces additional charges.
Court reviews evidence and impact of Terra’s failure
The sentencing was the result of an extended hearing, which involved the testimony of the victims, face-to-face and by phone, explaining the financial impact on individuals and families as a result of the breakdown of Terra. Judge Engelmeyer considered those testimonies with the guilty pleas that Kwon had already signed.
In August, Do Kwon was found guilty of one count of conspiracy to commit commodities fraud, securities fraud, and wire fraud, as well as one count of wire fraud, in connection with the business of Terraform Labs. At a hearing of his plea, he admitted to being involved in an active conspiracy to defraud buyers of the UST stablecoin.
The collapse of Terraform Labs marked the first major event in the broader crypto meltdown of 2022. The collapse of the company led to a series of market tensions, including mass liquidations, that contributed to the November 2022 FTX implosion.
Plea deal reduced charges but did not limit the judge’s decision
Do Kwon was initially charged with nine counts and faced a maximum sentence of 135 years to serve if found guilty on all counts. In a plea bargain agreed upon in the summer, the prosecutors reduced the charges to two counts with a maximum aggregate sentence of 25 years. According to the agreement, prosecutors were required to consent to recommending a term of 12 years’ imprisonment and assist Kwon in seeking an international prison transfer to South Korea upon completion of half of his American jail term.
Judge Engelmeyer enquired about what such a pre-sentencing transfer means. According to court documents, he enquired about what guarantees there should be that Kwon would not be released prematurely in case he was sent back to South Korea. He also inquired with the prosecutors and defence counsel whether Kwon was still being charged in South Korea and whether the time spent abroad should be counted against his federal sentence.
In a written response submitted on Wednesday, the prosecutors said they did not have any specifics about the ongoing proceedings in South Korea but confirmed that authorities there had indicated that Kwon would disagree with the charges. In the filing, the Bureau of Prisons indicated that Kwon would receive credit for the time he had served in Montenegro after the four months related to a different conviction concerning a passport.
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