A New York court on Thursday sentenced cryptocurrency entrepreneur Do Kwon to 15 years in prison for orchestrating a massive fraud that led to the collapse of his digital assets and wiped out an estimated $40 billion in investor funds.
Kwon, 34, pleaded guilty in August after being extradited to the United States following a months-long international manhunt across Asia and Europe. He still faces additional fraud charges in South Korea.
Kwon’s company, Terraform Labs, created TerraUSD, a so-called “stablecoin” marketed as being pegged to the U.S. dollar to prevent wild price swings, alongside its sister token Luna. Promoted as breakthrough innovations in the crypto space, the tokens attracted billions of dollars and global publicity. Kwon became a tech celebrity in South Korea and was listed in Forbes 30 Under 30 Asia in 2019.
However, in May 2022, the two cryptocurrencies collapsed in what experts described as a pyramid-style structure, triggering a market meltdown that caused many investors to lose their life savings.
Kwon fled South Korea just before the crash and spent months evading authorities.
He was arrested in March 2023 at the airport in Podgorica, Montenegro, attempting to board a flight to Dubai with a forged Costa Rican passport. He was later extradited to the U.S.
Following his sentencing, U.S. prosecutors detailed how Kwon misled investors by making false claims about the stability and performance of his digital currencies.
At their peak in early 2022, TerraUSD and Luna were valued at more than $50 billion.
“Do Kwon devised elaborate schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit,” U.S. Attorney Jay Clayton said.
According to court documents, Kwon also sought political protection from various countries as investigations intensified. Prosecutors cited a recorded conversation in which he said his strategy in dealing with authorities was to “tell them to f*** off.”
In addition to the 15-year sentence, the court ordered Kwon to forfeit more than $19 million in proceeds from the fraud.
The U.S. Justice Department noted that he may be permitted to complete his sentence in South Korea, provided he serves at least half of it in the United States.
Kwon’s dramatic rise and fall has drawn comparisons to high-profile fraud cases such as that of Theranos founder Elizabeth Holmes, as global regulators continue tightening oversight of the cryptocurrency industry following successive scandals and exchange failures.
