US Seeks 12-Year Sentence for Do Kwon in TerraUSD Collapse Case
Federal prosecutors are seeking a 12-year prison sentence for Do Kwon, co-founder of Terraform Labs, for orchestrating the collapse of TerraUSD that wiped out about $40 billion and triggered cascading market failures, including the downfall of FTX. Kwon pleaded guilty in August to conspiracy and wire fraud under a plea agreement which caps prosecutorial recommendations at 12 years, although the statutory maximum sentence is 25 years.\n\nSentencing is scheduled for December 11 before Judge Paul Engelmayer. Kwon's defense is seeking a sentence of five years behind bars. The Department of Justice noted that Kwon's fraudulent statements caused a chain reaction across cryptocurrency markets and contributed to broader systemic damage beyond just Terra's investors, including impacting the FTX collapse.\n\nKwon admitted that from 2018 to 2022, he participated in a scheme to defraud crypto purchasers by making false statements about TerraUSD's peg restoration and concealing the role of Jump Trading during a May 2021 depeg event. Prosecutors are not pursuing restitution from investors due to the difficulty in calculating losses across global markets. US authorities have also indicated they may support Kwon serving the second half of any sentence in South Korea if plea terms and international transfer rules are met.\n\nObservers expect sentences in the range of 15 to 20 years given the impact on victims, though sentencing guidelines could imply a higher range. A five-year plea deal would face steep odds without going to trial.\n\nKwon was arrested in Montenegro in March 2023 and spent nearly two years in detention before being transferred to the US in January to face charges. The case is among the most closely watched legal proceedings in the cryptocurrency industry.
