NEW YORK – Terraform Labs co-founder Do Kwon was sentenced to 15 years in prison on Wednesday for his role in a massive fraud in which approximately $50 billion was wiped from the crypto ecosystem over the course of just three days in May 2022.
The sentence, handed down by District Judge Paul Engelmeyer of the Southern District of New York (SDNY), is slightly longer than the 12-year sentence requested by prosecutors and much longer than the five-year sentence suggested by Kwon’s lawyers. Kwon must serve at least half of this sentence before he can request a transfer to South Korea, where he faces further charges.
The judge’s ruling came after a lengthy hearing, in which victims testified both in person and by telephone about how Terra’s collapse affected them or their families.
Read more: Do Kwon’s sentencing hearing drags on as court weighs mountain of victim testimony
In August, Kwon pleaded guilty to one count of conspiracy to commit commodity fraud, securities fraud, and wire fraud, and one count of committing wire fraud in connection with fraudulent schemes at Terraform Labs. During his plea hearing before Judge Engelmeyer, the South Korean national admitted that he “knowingly participated in a scheme to defraud and did, in fact, defraud” purchasers of the TerraUSD stablecoin (UST).
Under Kwon’s leadership, Terraform Labs was the first proverbial domino to fall in the 2022 cryptocurrency crash, setting off a cascade of liquidations and wipeouts that ended with the implosion of the once-mighty FTX in November 2022. Former FTX CEO Sam Bankman-Fried is currently serving a 25-year prison sentence for fraud revealed in the exchange’s collapse, and Alex Mashinsky, founder of bankrupt cryptocurrency lending platform Celsius Network, is currently serving a 12-year sentence for fraud.
In exchange for Kwon’s guilty plea this summer, prosecutors reduced the original nine-count indictment (under which Kwon faced a maximum sentence of 135 years in prison if convicted on all counts) to just two, under which Kwon faces a combined maximum sentence of 25 years in prison. However, as part of the plea deal, prosecutors agreed to recommend a sentence of only 12 years in prison and, once Kwon has served half of his maximum sentence, to support any motion he files for an international prison transfer back to South Korea.
Kwon’s possible transfer back to his native country appeared to concern Engelmeyer, who asked in a court filing before sentencing what “assurance” the United States would have that Kwon would not be released before his prison sentence ended. Engelmeyer also pressed prosecutors and Kwon’s defense attorneys to answer other questions, including whether Kwon still faced pending criminal charges in South Korea and whether he should receive credit for the 17-month period he spent in Montenegrin custody before he was finally extradited to the United States in January.
In a written response filed in court on Wednesday, prosecutors said they did not have any information about the charges in South Korea, but that their counterparts in South Korea had said they could not reveal what punishment they intended to seek, but that it appeared Kwon would be fighting his charges there.
The memo also said the Bureau of Prisons would give Kwon credit for time he spent in a Montenegrin prison “over and above the four-month period he served for his passport fraud offense” there, although there is no agreement on how much credit he would receive specifically.
