Do Kwon to be sentenced in New York for $40 billion crypto collapse

Do Kwon, the cryptocurrency developer whose TerraUSD and Luna projects collapsed in 2022 and wiped out an estimated $40 billion, is scheduled to be sentenced Thursday in federal court in Manhattan. The case marks one of the most high-profile prosecutions linked to the digital asset turmoil that hit the industry two years ago.

Kwon, 34, co-founded Terraform Labs and led the design of TerraUSD, a token touted as a stablecoin intended to maintain a stable value even during market swings. He later acknowledged in court that he misrepresented how the coin maintained its price and admitted to misleading investors about the technology behind it. Prosecutors say those guarantees concealed practices that artificially propped up TerraUSD’s value during times of stress.

Sentencing request and charges

U.S. District Judge Paul A. Engelmayer will preside over the sentencing hearing, which begins at 11 a.m. in New York. Federal prosecutors argue that Kwon’s conduct fueled one of the largest losses in cryptocurrency history and have asked the court to impose a prison sentence of at least 12 years.

Kwon’s legal team has urged the judge to impose no more than five years, saying he intends to return to South Korea afterward to address pending charges there.

Earlier this year, the U.S. Department of Justice charged Kwon with nine criminal counts, including securities fraud, wire fraud, commodities fraud and money laundering conspiracy. The case centers on statements Kwon made in 2021, when TerraUSD began to lose its $1 peg. At the time, Kwon claimed that the blockchain algorithm known as the “Terra Protocol” had stabilized the currency.

What prosecutors say really happened

Court documents claim that rather than relying solely on the algorithm, Kwon recruited a high-frequency trading firm to secretly purchase large amounts of TerraUSD to bring the token back up to the dollar. That intervention, which prosecutors say effectively masked flawed mechanisms in the stablecoin’s design, was never revealed to investors.

In August, Kwon pleaded guilty to conspiracy to defraud and wire fraud, admitting that his public statements about TerraUSD’s recovery were incomplete and misleading.

“I could not reveal the role of a trading company in restoring parity,” Kwon said at the hearing. “My statements were false and I accept responsibility.”

Civil sanctions and future proceedings

Kwon also reached a major civil settlement in 2024 with the US Securities and Exchange Commission. Under the settlement, Kwon and Terraform Labs agreed to pay $4.55 billion, including $80 million personally, and he agreed to a ban on engaging in cryptocurrency-related activities.

South Korean authorities have separately charged Kwon in connection with the same incidents. As part of his plea deal in the United States, prosecutors said they would not oppose a request for Kwon to be transferred abroad after serving half of the sentence imposed by the judge.

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