Do Kwon Sentenced to 15 Years for $40B Terraform Fraud

A recent announcement posted by the US Attorney’s Office for the Southern District of New York announced that Do Kwon, founder of Terraform Labs, has been sentenced to 15 years in prison for fraud and manipulation.

The statement cited The US Attorney for the Southern District of New York, Jay Clayton, who announced the sentence of 15 years in prison for committing wire fraud and conspiring to commit securities fraud, commodities fraud, and wire fraud, in connectiion with Kwon’s fraud centered around Terraform Labs.

“Do Kwon devised elaborate schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit,” Clayton said. He added: “When his crimes caught up to him, Kwon embarked on a deceptive public relations campaign to cover up his fraud, laundered the proceeds of his illegal schemes, and sought to purchase political protection in foreign countries to evade criminal prosecution.”

Commenting further, Clayton said that fraud is fraud, whether it takes place on the streets, in securities markets, or in an emerging and important digital asset ecosystem.

Kwon Gets 15 Years In Prison

Kwon pleaded guilty in August to conspiracy to defraud and wire fraud charges, stemming from the collapse of Terraform Labs in 2022. Described as “epic fraud,” the incident resulted in over $40 billion in losses, as the firm unravelled following the TerraUSD stablecoin’s de-pegging from the US dollar.

Soon after that, other Terraform tokens plummeted in value to near zero, causing massive losses for investors. Interestingly, only days after his sentence was announced, Do Kwon recommended his own sentence of 5 years in prison.

Before the Terraform Labs’ collapse, however, Kwon was accused of misleading investors about a previous fall in TerraUSD’s value in 2021. Back then, he claimed that a computer algorithm had restored the stablecoin’s value, when in reality, he had arranged for a high-frequency trading company to buy millions of dollars of the coin to artificially boost demand and its value.

In August of this year, he said: “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…What I did was wrong.”

After his apology to the victims, Judge Paul Engelmayer sentenced him to 15 years in prison, despite the fact that prosecutors only asked for a minimum of 12. He told Kwon that his offense “caused real people to lose $40 billion in real money, not some paper loss.”