Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that lost an estimated $40 billion in 2022, was sentenced to 15 years in prison for what a judge called an “epic fraud.”
U.S. District Judge Paul A. Engelmayer, who handed down the sentence, severely reprimanded Kwon for repeatedly lying to ordinary investors who trusted him with their life savings.
“This was a fraud on an epic, generational scale. In the history of federal prosecutions, there are few frauds that have caused as much damage as what you have caused, Mr. Kwon,” Engelmayer said during a hearing in Manhattan federal court.
Kwon, 34, co-founder of Singapore-based Terraform Labs and developer of the TerraUSD and Luna coins, previously pleaded guilty and admitted to misleading investors about a coin that was supposed to maintain a stable price during periods of volatility in the cryptocurrency market.
He is one of several cryptocurrency tycoons facing federal charges after the decline in digital token prices in 2022 caused several companies to collapse.
Dressed in yellow prisoner clothing, Kwon addressed the court and apologized to his victims, including the hundreds of people who sent letters to the court describing the harm they had suffered.
“All of their stories were heartbreaking and reminded me again of the great losses I have caused. I want to tell these victims that I am sorry,” Kwon said.
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Ayyildiz Attila, one of hundreds of victims who sent letters to the court, said she lost between $400,000 and $500,000 due to the collapse.
“My savings, my future and the results of years of sacrifice were gone. I struggled to keep up with payments and responsibilities, and everything I worked for was erased,” Attila said.
Kwon’s attorney, Sean Hecker, said in an email after the sentencing that Kwon spoke from the heart, expressed genuine remorse and will continue his efforts to right his wrongs.
U.S. Attorney Jay Clayton in Manhattan said in a statement after the hearing that Kwon devised elaborate schemes to inflate the value of his cryptocurrencies and escaped liability when his crimes caught up with him.
Prosecutors asked for a sentence of at least 12 years in prison, arguing that the collapse of Kwon’s Terra cryptocurrency caused billions of dollars in losses and set off a cascade of crises in the cryptocurrency market.
Kwon’s lawyers requested that he be sentenced to no more than five years so he could return to South Korea to face criminal charges.
Prosecutors charged Kwon in January with nine criminal counts of securities fraud, wire fraud, commodity fraud and money laundering conspiracy.
Kwon was accused of misleading investors in 2021 about TerraUSD, a so-called stablecoin designed to maintain a value of $1. Prosecutors alleged that when TerraUSD fell below its value of $1 in May 2021, Kwon told investors that a computer algorithm known as “Terra Protocol” had restored the coin’s value.
However, Kwon arranged for a high-frequency trading firm to secretly purchase millions of dollars worth of the token to artificially support its price, according to charging documents.
Kwon pleaded guilty in August to two counts, conspiracy to defraud and wire fraud, and apologized in court for his conduct.
“I made false and misleading statements about why it recovered its value by not disclosing a trading firm’s role in restoring that value,” Kwon said at the time. “What I did was wrong.”
Kwon agreed in 2024 to pay an $80 million civil penalty and be barred from transacting cryptocurrency as part of a $4.55 billion settlement he and Terraform reached with the U.S. Securities and Exchange Commission.
He also faces charges in South Korea. As part of his plea deal, prosecutors will not oppose Kwon’s possible request to be transferred abroad after serving half of his sentence in the US.
With information from Reuters
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