Do Kwon Gets 15 Years for Terra Fraud That Wiped Out $40 Billion

Quick overview

Do Kwon got hit with a 15-year prison sentence Thursday for orchestrating what Judge Paul Engelmayer called an “epic fraud.” The Terraform Labs co-founder’s stablecoin scheme erased roughly $40 billion in value over three days back in May 2022.

The sentence landed higher than what prosecutors wanted (12 years) and way above what Kwon’s lawyers asked for (5 years). Engelmayer didn’t hold back, saying there are few frauds in federal prosecution history that caused this much damage. He called Kwon’s conduct during TerraUSD’s final collapse “despicable.”

Back in August, Kwon cut a deal. Took a plea on conspiracy and wire fraud. Started with nine charges but he knocked it down. At 34, Stanford educated, he stood up in court and said yeah, he scammed people who trusted TerraUSD. The coin was marketed as stable, always worth a dollar.

So here’s how the con worked. May 2021 rolls around and TerraUSD starts slipping under a dollar. Kwon goes on Twitter, tells everyone there’s this algorithm, “Terra Protocol,” handles it automatically. Lies through his teeth. What he actually did? Paid some trading shop quietly to dump money into tokens, artificially pump the price. Nobody knew.

Twelve months later, everything imploded. TerraUSD crashed below a dollar, stayed there. Luna went with it. Retail investors? Destroyed. The damage kept spreading too, hit FTX eventually, other exchanges.

Listening to victims testify took all day and it was painful. This one guy stood up, said his marriage ended over it, his boys can’t go to university now, he moved back to Croatia living with mom and dad. Lost it all. Someone else talked about getting relatives involved, getting charities to put money in. Watched it all burn.

Stanislav Trofimchuk put in $190,000 with his family. Ended up with $13,000. Told the judge “17 years of our life, gone.” Called it “two weeks of sheer terror” when everything collapsed. Chauncey St. John mentioned nonprofits dropping $2 million plus. Some church lost around $900,000.

Over 300 people wrote letters. Prosecutors read chunks of them out loud. College kid trying to graduate lost $11,400, wrote about how scary it was seeing money just vanish in hours. Their letter said “What happened was not an accident. It was not a market event. It was deception.”

Kwon stood up after that, said sorry. Told the court he thinks about it constantly, what he should’ve changed, different decisions. Judge figured maybe a million people got hurt total.

Then there’s the running. Kwon bolted to Serbia after things fell apart. Hopped to Montenegro with forged documents. Tried making it to Dubai but got arrested. Judge brought that up. Didn’t do him any favors.

Deal he signed says minimum half the sentence before requesting transfer back to South Korea. More criminal cases waiting there. Judge asked pointed questions about what stops South Korea from releasing him early once he’s back on their soil.

Prosecutors pointed out Terra wiped out more money than SBF at FTX, more than OneCoin. Bankman-Fried’s doing 25 years right now. Mashinsky from Celsius got 12. Kwon landed at 15, somewhere in the middle of crypto’s Hall of Shame.

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Sophia Cruz

Financial Writer - Asian & European Desks

Sophia is an experienced writer, reporter and newsdesk member, mostly on the financial sectors. For the past 5 years Sophia has covered a wide variety of topics such as the financial markets, economics, technology, fin-tech and trading. Sophia has been a part of the FX Leaders team since 2017 and works on producing valuable content and information for traders of all levels of experience.

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