‘Epic fraud’: TerraUSD creator Do Kwon sentenced to 15 years’ jail over $52b crypto collapse
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Do Kwon pleaded guilty in August to conspiracy to defraud and wire fraud.
PHOTO: REUTERS
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NEW YORK – Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that lost an estimated US$40 billion (S$52 billion) in 2022, was sentenced to 15 years in jail on Dec 11, for what a judge called an “epic fraud”.
Kwon, 34, who co-founded Singapore-based Terraform Labs and developed the TerraUSD and Luna currencies, previously pleaded guilty and admitted to misleading investors about a coin that was supposed to maintain a steady price during periods of crypto market volatility.
US District Judge Paul A. Engelmayer, who handed down the sentence, sharply rebuked him for repeatedly lying to everyday 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 harm as you have, Mr Kwon,” the judge said during a hearing in a Manhattan federal court.
Kwon is one of several cryptocurrency moguls to face federal charges after a slump in digital token prices in 2022
Dressed in yellow prison garb, he addressed the court and apologised to his victims, including the hundreds who submitted letters to the court describing the harm they had suffered.
“All of their stories were harrowing and reminded me again of the great losses that I’ve caused. I want to tell these victims that I am sorry,” he said.
Mr Ayyildiz Attila, one of the hundreds of victims who submitted letters to the court, said he lost between US$400,000 and US$500,000 in the collapse.
“My savings, my future and the results of years of sacrifice disappeared. I struggled to keep up with payments and responsibilities, and everything I had worked for was erased,” he said.
Kwon’s lawyer Sean Hecker said in an e-mail after the sentencing that Kwon spoke from the heart, expressed genuine remorse and will continue his efforts to make amends.
US Attorney Jay Clayton in Manhattan said in a statement following the hearing that Kwon devised elaborate schemes to inflate the value of his cryptocurrencies and fled accountability when his crimes caught up with him. Prosecutors had asked for a sentence of at least 12 years in prison, saying the crash of Kwon’s Terra cryptocurrency caused billions of dollars in losses and triggered a cascade of crises in the crypto market.
His lawyers had asked 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 over securities fraud, wire fraud, commodities fraud and money laundering conspiracy.
He was accused of misleading investors in 2021 about TerraUSD, a so-called stablecoin designed to maintain a value of US$1.
Prosecutors alleged that when TerraUSD slipped below its US$1 peg in May 2021, he told investors that a computer algorithm known as “Terra Protocol” had restored the coin’s value.
Instead, he arranged for a high-frequency trading firm to secretly buy millions of dollars of the token to artificially prop up its price, according to charging documents.
He pleaded guilty in August to two counts, conspiracy to defraud and wire fraud, and apologised in court for his conduct.
“I made false and misleading statements about why it regained its peg by failing to disclose a trading firm’s role in restoring that peg,” he said at the time. “What I did was wrong.”
He agreed in 2024 to pay US$80 million as a civil fine and be banned from crypto transactions as part of a US$4.55 billion settlement he and Terraform reached with the US Securities and Exchange Commission.
He also faces charges in South Korea. As part of his plea deal, prosecutors will not oppose Kwon’s potential application to be transferred abroad after serving half his US sentence. REUTERS
