Terra’s fall is complete: Do Kwon gets 15 years in prison in American court

A federal judge condemned Do Kwon’s “epic fraud” and sentenced him to 15 years for misleading investors during TerraUSD’s catastrophic collapse.

U.S. District Judge Paul A. Engelmayer called the misconduct in a Manhattan courtroom an “epic fraud.” Kwon, now 34, had previously admitted to misleading investors about the stability mechanisms of TerraUSD, a token marketed as protection during periods of market turmoil.

“Epic fraud”

During a hearing in Manhattan federal court, Engelmayer said

“This was a fraud on an epic generational scale. In the history of federal prosecutions, few frauds have caused as much damage as you, Mr. Kwon.”

The sharp collapse of TerraUSD’s peg and the broader destruction of both tokens in 2022 ultimately erased an estimated $40 billion in value and destabilized the crypto sector, as well as leading to bankruptcies at multiple companies. During the hearing, Kwon addressed the court as well as the hundreds of victims who submitted written accounts detailing their financial and emotional losses. He apologized for the consequences of his actions.

Among them was Ayyildiz Attila, who said he had lost almost half a million dollars and described how years of savings and long-term plans disappeared in the turmoil after the crash. Prosecutors alleged that Kwon orchestrated efforts to boost the value of his tokens and quietly enlisted a high-frequency trading firm to intervene when TerraUSD fell below the $1 level for the first time, even as he publicly attributed the recovery to the project’s automated stabilization system.

The charging documents detailed nine criminal counts, including securities fraud, bank fraud, commodities fraud and money laundering conspiracy. However, Kwon ultimately pleaded guilty to two counts of conspiracy to defraud and wire fraud. Prosecutors had sought a minimum of 12 years, while the defense insisted on no more than five years, citing his desire to return to South Korea to deal with separate criminal proceedings.

In addition to the prison sentence, Kwon previously agreed to pay an $80 million civil penalty and accept a ban on crypto-related activities as part of a multibillion-dollar settlement with the US Securities and Exchange Commission (SEC). Under the terms of his plea deal, U.S. authorities will not oppose a request for transfer abroad once he has served half his sentence, opening the possibility that he could eventually be charged in his home country.

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Kwon’s behavior leading up to Terra’s collapse also resurfaced. Once branded as a trash-talking entrepreneur who openly mocked his opponents, he later admitted that he had gotten “carried away” in his interactions on crypto Twitter. In interviews, he said he had developed a personality over time and behaved in certain ways largely for “entertainment value.” While he expressed regret for his tone and took “full responsibility” for the weaknesses in Terra’s design, he claimed that some of the charges from South Korean prosecutors were “politically motivated.”

Fatman ponders Kwon’s demise

The anonymous investigator, Fatman Terra, who helped expose Kwon after several whistleblowers approached him, including an employee of trading firm Jump Crypto, admitted that while he once doubted there would ever be accountability, he now believes the outcome was inevitable. He added:

“Crypto is full of carpet pullers and scammers – many of them very sophisticated and manipulative. Most get away with what they do. People like Zach manage to catch a few big ones, but law enforcement doesn’t have nearly enough resources to go after everyone, and most misdeeds in this area are swept under the rug. But when you are wronged – harassed, tormented, scammed, roughed up, whatever it may be – know that there are decisive actions you can take take action to bring justice to this situation.”