DOJ Seeks Maximum 12-Year Sentence for Terra Founder Do Kwon, Citing SBF and $40B Losses

The U.S. Department of Justice has formally requested that Terraform Labs co-founder Do Kwon receive the maximum 12-year prison sentence outlined in his August plea deal. In a legal filing submitted on Thursday, federal prosecutors argued that a lesser sentence would create "unwarranted sentencing disparities" compared to other major crypto fraud cases, specifically citing the 25-year sentence given to FTX founder Sam Bankman-Fried (SBF).

Prosecutors emphasized the staggering scale of losses attributed to Kwon, stating they "eclipsed" those caused by Bankman-Fried, Celsius founder Alex Mashinsky, and OneCoin's Karl Sebastian Greenwood combined. The collapse of the Terra ecosystem in May 2022, which involved the algorithmic stablecoin UST and its sister token LUNA, wiped out over $40 billion in investor value and triggered a cascading market crisis known as "Crypto Winter."

The DOJ filing directly countered a November request from Kwon's defense team, which sought a sentence of no more than five years. Prosecutors noted that Kwon's attorneys failed to mention the Bankman-Fried case and argued that a 20-year difference between the requested sentences was unjustified, even considering SBF's decision to go to trial.

The filing also rejected comparisons to the 12-year sentence given to Alex Mashinsky, noting that while Mashinsky contested his conduct, he did not obtain a fake passport and attempt to evade authorities. Prosecutors highlighted that Mashinsky's crimes involved $5 billion in losses, which "pales in comparison" to Kwon's $40 billion.

Kwon, a 34-year-old Korean national, was arrested in Montenegro in 2023 on charges of using forged travel documents after warrants were issued by both the U.S. and South Korea. Following a protracted extradition battle, he was brought to New York earlier this year. He pleaded guilty in August to two counts: conspiracy to defraud and wire fraud.

Kwon is scheduled to be sentenced by U.S. District Judge Paul Engelmayer in Manhattan on December 11. Despite the plea deal capping the DOJ's request at 12 years, the judge retains the authority to impose a sentence ranging from a significantly shorter term to the statutory maximum of decades in prison. Kwon's lawyers have also noted that he faces the possibility of up to 40 years in prison upon potential deportation to South Korea, where a separate case against him is pending.