Terraform Labs founder Do Kwon has been sentenced to 15 years in federal prison for his role in the catastrophic collapse of the Terra ecosystem in 2022, which erased approximately $40 billion from the crypto market. The sentence was handed down on Thursday by U.S. District Judge Paul Engelmayer in the Southern District of New York.
Kwon, 33, pleaded guilty in August to a series of fraud charges, including wire fraud and conspiracy to defraud. Judge Engelmayer described the scale of the fraud as "eye-popping" and "unusually serious," stating that Kwon had "publicly lied to the market" for four years. The judge highlighted Kwon's now-infamous social media posts, including one that read "Deploying more capital - steady lads," as devastatingly misleading to investors.
During the emotional sentencing hearing, several victims addressed the court to describe their financial ruin. A Ukrainian man testified to losing nearly $200,000—savings accumulated over 17 years—after trusting Kwon's assurances about the safety of Terra's algorithmic stablecoin, UST, and the 20% yields offered by its Anchor Protocol. Another victim, Tatiana Dontsova, stated she sold her apartment in Moscow to invest with Kwon, turning $81,000 into $13 and leaving her officially homeless.
Federal prosecutors had requested a 12-year sentence, while Kwon's defense sought a five-year term. Judge Engelmayer rejected both, stating the prosecution's request was "unreasonable" and the defense's was "so implausible it would require appellate reversal." The judge emphasized the need for incapacitation, telling Kwon, "You have been bitten by the crypto bug and I don't think that's changed." He added that without the guilty plea, the sentence would have been higher.
As part of his plea deal, Kwon is set to forfeit $19 million and some properties. He expressed remorse in court, wearing a yellow jumpsuit, and stated, "The blame should be pointed at me. I failed to operate the system in the right way." He also expressed a desire to serve part of his sentence in his home country of South Korea. Prosecutors have agreed he may serve the second half of his 15-year term there, after which he could face additional charges carrying up to 40 more years in prison.
The Terra collapse was a pivotal event that triggered a cascade of failures across the crypto industry, culminating in the bankruptcy of FTX months later. In April 2024, Terraform Labs and Kwon were found liable on civil fraud charges and later agreed to a $4.5 billion settlement with the U.S. Securities and Exchange Commission before the company dissolved.
