On December 11, 2025, Do Hyeong Kwon, co-founder and former CEO of Terraform Labs, was sentenced to 15 years in federal prison in the United States. This sentence was a result of his involvement in a significant fraud that led to the collapse of the TerraUSD (UST) stablecoin and its counterpart token Luna, resulting in a loss of $40 billion in May 2022. The legal actions against Kwon, who pleaded guilty to two fraud-related charges in August, have concluded with his sentencing in a Manhattan federal court.
The 34-year-old South Korean had admitted guilt to two charges of wire fraud and conspiracy to defraud in the United States.
It was during a hearing in New York that Kwon, who co-founded Terraform Labs in Singapore and developed the TerraUSD and Luna currencies, was handed his sentence.
His acts were described by U.S. District Judge Paul Engelmayer as “a fraud of unprecedented generational magnitude.”
Because of the harm done to the victims, the judge determined that a lighter sentence would not be adequate and instead imposed a longer sentence than the 12 years that the prosecution had requested.
“Very few cases in the history of federal prosecutions have caused more financial harm than you did,” he remarked.
The US government claimed Sam Bankman-Fried’s FTX failure and the “crypto winter” of 2022 were largely caused by Kwon’s dishonest behavior and customer abuse.
“I have spent almost every waking moment of the last few years thinking of what I could have done different and what I can do now to make things right.” Kwon said.
Kwon’s attorneys contended that his activities were driven by a desire to support Terraform’s TerraUSD stablecoin rather than self-interest and that he should get a term of no more than five years in prison.
The request was deemed “wildly unreasonable” by the judge.
Since his extradition from Montenegro last year, where he was detained for using a false passport, Kwon has been detained in the United States.
Kwon consented to a forfeiture $19.3 million and many properties that the prosecution alleged he obtained via the fraud as part of his guilty plea.
If Kwon follows the conditions of his plea agreement, prosecutors indicated they would support him completing the second half of his sentence in South Korea, where he is still facing further charges.
The prosecution stated that they will not pursue compensation for the investors who lost a total of $40 billion, citing the difficulty of figuring out individual investor’s losses.
Even after Kwon entered a guilty plea, some of his investors continued to believe in him, according to the judge, who compared reading some of their letters to “reading the words of cult followers.”
Engelmayer claimed to have received letters from 315 victims worldwide, many of whom claimed that Kwon’s deception had cost them their houses, retirement savings, money for medical bills, and student funds.
After graduating from Stanford University, Kwon went back to South Korea and, with co-founder Daniel Shin, started the company that would eventually become Terraform Labs in 2017.
The value of Luna, a more conventional token whose value fluctuated but was tightly tied to TerraUSD, increased to $50 billion by the spring of 2022, according to prosecutors, as a result of bogus claims and other factors encouraging institutional and ordinary investors to purchase Terraform products.
Following the failure of several companies in 2022 due to a decline in digital token prices, Kwon is one of several cryptocurrency tycoons facing government charges.
In 2024, Bankman-Fried, the creator of the biggest cryptocurrency exchange in the US, received a 25-year prison sentence.
This sentence highlights the legal repercussions for business owners who deceive and manipulate investors, making a strong statement from U.S. authorities about accountability in the cryptocurrency sector.
