Crypto Tycoon Do Kwon Sentenced to 15 Years in Prison for $40B TerraUSD Fraud

Crypto entrepreneur Do Hyeong Kwon, the South Korean co-founder of Terraform Labs, was sentenced to 15 years in prison on Thursday after pleading guilty to federal fraud charges related to the collapse of his cryptocurrencies TerraUSD (UST) and Luna, a crash that wiped out roughly $40 billion in investor assets and helped destabilize global crypto markets. 

U.S. District Judge Paul A. Engelmayer delivered the sentence in Manhattan federal court, calling the offense “a fraud on an epic, generational scale” and noting the vast financial and emotional toll on investors. The punishment was harsher than the 12 years prosecutors sought and far above the defense’s request of five years. 

Kwon, 34, had earlier pleaded guilty to conspiracy to defraud and wire fraud in August 2025 as part of a plea deal with U.S. prosecutors. He admitted to making false and misleading statements about TerraUSD’s stability, falsely claiming that a built-in algorithm maintained its value when in fact it was secretly supported by outside cash infusions to prop up prices. 

Historic Collapse and Market Fallout

At its peak, TerraUSD and its sister token Luna commanded tens of billions in market value and attracted global investment, with Kwon once featured on Forbes’ “30 Under 30” lists. However, in May 2022, TerraUSD lost its $1 peg, triggering a death spiral in both assets and resulting in dramatic sell-offs across the cryptocurrency sector. The crash contributed to broader market turmoil that ultimately affected other major firms. 

Prosecutors detailed how Kwon’s conduct misled investors, including individuals, nonprofits, and institutional participants, many of whom lost life savings, retirement funds, and charitable assets. In dozens of victim impact statements, investors described personal tragedies, including loss of savings, family strain, and even suicidal thoughts.

Extradition, Plea and Penalties

Kwon was arrested in March 2023 in Montenegro on a fake passport charge and later extradited to the United States at the end of 2024. As part of his plea deal, he agreed to forfeit more than $19 million in proceeds, and prosecutors have indicated he could become eligible to serve part of his sentence in his native South Korea, where he also faces pending legal charges. 

Defense attorneys argued Kwon’s conduct stemmed from hubris rather than greed, but the judge emphasized the real-world damage caused, saying that the losses were not mere “paper losses” but deeply affected people’s lives. 

Industry and Regulatory Ramifications

The Terra collapse and Kwon’s sentencing mark one of the largest fraud convictions in crypto history, eclipsing other major scandals and reinforcing calls for stronger oversight in digital assets. Regulators, lawmakers, and industry leaders have used the case to highlight systemic risks in the largely unregulated sector.