Terraform Labs’ Do Kwon Sentenced to 15 Years in Prison

Key Highlights

• Do Kwon, founder of Terraform Labs, was sentenced to 15 years in U.S. federal prison for orchestrating the fraud that led to the $40 billion collapse of the TerraUSD
• Kwon has previously pleaded guilty to conspiracy charges for wire fraud and securities fraud
• As part of his plea, he forfeited $19.3 million and accepted a lifetime ban from leading any company that issues securities

Do Kwon, the co-founder of Terraform Labs, was sentenced to 15 years in a federal prison in New York on Thursday. This sentencing will mark the final chapter in the downfall of the man behind one of the most devastating financial failures in the history of digital assets.

Terra-Luna Crash: Do Kwon Gets 12-Year Sentence in Prison

Do Kwon was found guilty in August of charges of conspiracy to commit wire fraud. The case started after the catastrophic failure of his company’s two digital currencies, the stablecoin TerraUSD and its sister token LUNA, in May of 2022. 

Reportedly, this catastrophic crash wiped out an estimated $40 billion in market value in just a few hours. 

In court, U.S. District Judge Paul Engelmayer called Do Kwon’s deception as colossal, directly stating that his fraud was present in every part of his company’s business. As part of his plea, Do Kwon has been ordered to forfeit $19.3 million in illegal proceeds and is now banned for life from serving as an officer or director of any company that issues securities. 

How the Algorithmic Stablecoin Failed

Kwon launched Terraform Labs in Singapore in 2018. The company’s flagship project was TerraUSD, which was marketed as an algorithmic stablecoin. Unlike stablecoins, such as USDC or Tether, which are backed by real dollars held in reserve, UST was designed to hold its $1 value through a complex, automated relationship with Luna. 

The system relied on traders to constantly burn and mint tokens to correct its price. Kwon and his team had promoted the project as a high-yield alternative to traditional savings and attracted huge investors around the world. 

However, during the turmoil in the cryptocurrency market in 2022, the system failed to maintain its peg with USD. UST lost its peg to the dollar and collapsed to pennies, while Luna’s value hyperinflated into worthlessness. 

Prosecutors revealed that as the crisis news came out, Kwon and his team secretly directed over $100 million in manipulative trades in a failed attempt to artificially inflate UST’s price, all while telling the public the system was working as designed. 

After the collapse, Do Kwon fled to South Korea, which led to an international manhunt. He was eventually arrested in Montenegro in March 2023 for using a forged passport. After serving a sentence there, he was extradited to the United States in January 2025 to face charges

In addition to his U.S. sentence, Kwon also faces some separate criminal charges in South Korea, where authorities may ask for his transfer after he serves a sentence of his American prison term.

The company he founded, Terraform Labs, settled his own civil case with the U.S. Securities and Exchange Commission (SEC) in April 2024 for $4.55 billion. 

“This case affirms what court after court has said: The economic realities of a product—not the labels, the spin, or the hype—determine whether it is a security under the securities laws,” former SEC Chair Gary Gensler stated in the official document. “Terraform and Do Kwon’s fraudulent activities caused devastating losses for investors, in some cases wiping out entire life savings. Their fraud serves as a reminder that, when firms fail to comply with the law, investors get hurt. Terraform and Kwon fought our efforts to investigate – taking a fight over investigative subpoenas all the way to the Supreme Court. Thankfully, with this settlement, the victims of their massive fraud will now get some justice.”

Earlier, Kwon admitted his guilt. “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,” he said. “What I did was wrong.”

Also Read: CFTC Announces Withdrawal of Outdated Crypto Rules