Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that lost an estimated $40 billion in 2022, was sentenced on Thursday to 15 years in prison for what a judge called an “epic fraud,” according to a report by Reuters.
U.S. District Judge Paul A. Engelmayer, who handed down the sentence, sharply rebuked Kwon 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,” Engelmayer said during a hearing in Manhattan federal court.
Who is Do Kwon? What are the charges against him?
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 intended to maintain a steady price amid crypto market volatility.
He is one of several cryptocurrency moguls to face federal charges after a 2022 slump in digital token prices prompted the collapse of several companies, Reuters reported.
Dressed in yellow prison garb, Kwon addressed the court and apologized 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,” Kwon said.
Ayyildiz Attila, one of the many victims who submitted letters to the court, revealed that he lost between $400,000 and $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,” Attila said, as reported by Reuters.
Kwon’s lawyer Sean Hecker said in an email after the sentencing that Kwon spoke from the heart, expressed genuine remorse and will continue his efforts to make amends.
Here’s what US Attorney said
U.S. 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 to him.
Prosecutors had requested a sentence of at least 12 years in prison, arguing that the collapse of Kwon’s Terra cryptocurrency resulted in billions of dollars in losses and sparked a series of crises within the crypto market.
On the other hand, Kwon’s defense team asked for a sentence of no more than five years, hoping to allow him to return to South Korea to face additional criminal charges.
In January, prosecutors charged Kwon with nine criminal counts, including securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering.
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 slipped below its $1 peg in May 2021, Kwon told investors a computer algorithm known as “Terra Protocol” had restored the coin’s value.
Instead, Kwon 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.
Kwon 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,” Kwon said at the time. “What I did was wrong.”
Kwon agreed in 2024 to pay $80 million as a civil fine and be banned from crypto transactions as part of a $4.55 billion settlement he and Terraform reached with the U.S. Securities and Exchange Commission, Reuters reported.
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 U.S. sentence.
(With inputs from Reuters)