Do Kwon Sentencing: US Wants 12 Years for Terra’s $40 Billion Crash
Federal prosecutors are demanding a 12-year jail sentence for Terraform Labs co-founder Do Kwon for orchestrating the fraud that triggered TerraUSD’s catastrophic $40 billion collapse in 2022.
According to Bloomberg, the federal government described Kwon’s crimes as “colossal in scope” in a Thursday submitting earlier than US District Judge Paul Engelmayer, pointing to cascading market failures that in the end contributed to FTX’s downfall.
Kwon will face sentencing on December 11, with his own legal team requesting just five years behind bars.
The 34-year-old South Korean entrepreneur pleaded responsible in August to conspiracy and wire fraud costs underneath an settlement capping prosecutorial suggestions at 12 years.
However, the statutory most reaches 25 years for his function within the algorithmic stablecoin fraud.
Prosecutors Highlight Systemic Market Damage
The Justice Department’s sentencing memorandum emphasizes that Kwon’s fraudulent statements to clients triggered a sequence response throughout cryptocurrency markets.
Prosecutors particularly cited the collapse’s contribution to Sam Bankman-Fried’s FTX implosion as proof of broader systemic injury past Terra’s rapid investor losses.
Kwon admitted in court docket that between 2018 and 2022, he “knowingly agreed to take part in a scheme to defraud purchasers of cryptocurrencies” from Terraform Labs.
He acknowledged making false statements about TerraUSD’s peg restoration mechanisms and concealing Jump Trading’s secret function in propping up the stablecoin throughout a May 2021 depeg occasion that foreshadowed the bigger disaster.
The timing carries added significance, because the Trump administration has largely eased the tough-on-crypto enforcement actions, because the Biden administration did earlier than.
Most lately, President Donald Trump pardoned Binance founder Changpeng Zhao on October 23 after his conviction for anti-money laundering program failures on the world’s largest crypto trade.
Although the administration defended the pardon, claiming it was reviewed “with the utmost seriousness.”
Defense Cites Montenegro Detention and Dual Prosecution
Kwon’s attorneys argue that just about three years in what they describe as “brutal situations in Montenegro” ought to issue closely into sentencing calculations.
His authorized group emphasizes that extra prolonged imprisonment proves “far higher than vital” to attain justice, significantly given the substantial punishment already endured throughout prolonged international detention.
The protection submitting highlights Kwon’s settlement to forfeit over $19 million and a number of properties underneath the plea deal reached with prosecutors within the Southern District of New York.
His attorneys additional notice that Kwon nonetheless faces trial in South Korea for similar conduct, the place prosecutors are looking for a 40-year jail time period that creates extra penalties warranting consideration within the American sentence.
Prosecutors notably aren’t pursuing restitution from the thousands and thousands of traders who misplaced $40 billion, citing the extreme complexity of figuring out particular person losses throughout international markets.
US authorities have indicated they are going to assist Kwon serving the second half of his sentence in South Korea if he complies with the plea phrases and qualifies underneath worldwide switch applications.
Sentencing Disparities Raise Deterrence Questions
The contrasting approaches to main crypto fraud instances have sparked debate over the consistency of punishment.
Bankman-Fried received 25 years, plus an $11 billion restitution order, after a trial conviction on all counts, although current experiences point out that 4 years have been later decreased from that sentence.
Kwon’s guilty plea considerably decreased his publicity regardless of Terra’s bigger $40 billion loss in comparison with FTX’s $8 billion fraud.
Legal consultants notice that federal sentencing pointers for fraud at Terra’s magnitude would sometimes counsel advisory ranges approaching life imprisonment earlier than statutory caps, making Kwon’s five-year request face steep odds.
US agrees to suggest a 12-year jail sentence and a $19m fantastic for Do Kwon after he has pleaded responsible to wire fraud and conspiracy#DoKwon #TerraUSD https://t.co/ktCCrKzob4
— Cryptonews.com (@cryptonews) August 12, 2025
The Judge dealing with his case, Engelmayer, is understood for the strict dealing with of economic fraud instances, and most observers anticipate sentences of 15 to twenty years, given the large sufferer influence.
The December 11 listening to will decide whether or not cooperation by means of responsible pleas considerably reduces punishment in comparison with trial convictions, as in Bankman-Fried’s case.
Kwon was arrested in Montenegro in March 2023 whereas touring underneath a faux passport, triggering a prolonged extradition battle between US and South Korean authorities.
He spent practically two years detained within the Balkan nation earlier than being despatched to America in January, the place his case turned one of the vital intently watched authorized battles in cryptocurrency’s transient historical past.
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