TerraUSD founder Do Kwon sentenced to fifteen years in U.S. fraud case

Kwon, 34, received the sentence on December 11(2025) in Manhattan federal court, where the judge described his conduct as “a fraud on an epic, generational scale” and said few cases in federal history had caused comparable financial harm.

The court found that Kwon repeatedly misled investors about how TerraUSD worked and concealed a secret rescue operation by a trading firm that propped up the token during an earlier de-peg in 2021, while publicly claiming that an algorithmic mechanism alone had restored its $1 value.

In August 2025, Kwon pleaded guilty to two counts – conspiracy to defraud and wire fraud – as part of a deal under which prosecutors dropped several other charges. In court, he admitted that he made “false and misleading statements” by failing to disclose that a trading firm had intervened to support TerraUSD’s price when it slipped below its peg.

Prosecutors argued that Kwon orchestrated elaborate schemes to inflate the value and apparent stability of TerraUSD and Luna, including arranging for the trading firm to buy large quantities of TerraUSD to create the impression of algorithmic resilience. They said the collapse of his ecosystem in May 2022 caused billions of dollars in losses and contributed to a broader chain of failures across the crypto market.

Terraform Labs launched Luna in 2018 and the TerraUSD (UST) stablecoin in 2020, promoting UST as an algorithmic stablecoin designed to hold a steady $1 price by expanding or contracting Luna’s supply instead of holding cash reserves. At its peak in April 2022, Luna traded above $116, and the combined market value of Luna and TerraUSD approached $45 billion.

In early May 2022, TerraUSD began to lose its peg, plunging to a few cents within days while Luna collapsed from over $100 to near zero. The wipeout erased nearly $45 billion of market capitalisation in a week and triggered large losses across the wider crypto market, with hundreds of thousands of investors affected in South Korea, the United States and other countries.

During the sentencing hearing, the court received more than 300 victim letters describing the impact of the crash on individual savers. One investor, Ayyildiz Attila, said he lost between $400,000 and $500,000, telling the court that his savings and “the results of years of sacrifice disappeared” and that he struggled to keep up with payments and responsibilities after the collapse.

Addressing the court in prison clothing, Kwon apologised and said the victims’ accounts were “harrowing” and had reminded him of “the great losses” he caused. His lawyer argued that he was genuinely remorseful and was committed to making amends. Prosecutors, however, maintained that his regret came only after he had fled and after regulators and law enforcement closed in.

Prosecutors had asked for at least 12 years in prison, citing the scale of investor harm and Kwon’s conduct after Terra’s collapse. His defence team requested a sentence of no more than five years so that he could return sooner to South Korea, where he also faces criminal charges related to TerraUSD and Luna. The judge ultimately settled on 15 years, above the prosecution’s minimum request.

As part of a separate civil case, Kwon and Terraform Labs previously agreed to a settlement with the US securities regulator that included a $4.55 billion penalty package and an $80 million personal fine for Kwon, along with a ban on his participation in crypto transactions. Under his plea agreement in the criminal case, prosecutors will not oppose a future request to transfer him abroad after he serves half of his US sentence, potentially allowing him to face proceedings in South Korea.

Kwon was arrested in March 2023 at an airport in Montenegro while trying to travel to Dubai using falsified Costa Rican and Belgian passports, after months during which authorities in South Korea and the United States sought his arrest and placed him on an international wanted list. He was later convicted in Montenegro of using forged documents and ultimately extradited to the United States to face the fraud case that has now led to his 15-year sentence.

The sentencing makes Kwon one of several high-profile crypto executives to receive substantial prison terms following investigations into misconduct during the last market cycle. The founder of a major offshore crypto exchange received a 25-year sentence in a separate fraud case linked to the 2022 market turmoil, while the former chief executive of an affiliated trading firm was sentenced to two years and another prominent exchange founder received a four-month term in a US case centred on compliance failures.

Terraform Labs, which Kwon co-founded in 2018, built an ecosystem around TerraUSD and Luna that also included decentralised finance projects such as Anchor and Mirror, drawing in users with high advertised yields and a narrative of algorithmic stability. After the collapse, regulators in multiple jurisdictions launched probes into whether the tokens had been marketed as investment products without proper registration and whether key claims about their use in real-world payments were accurate.

In the wake of Terra’s failure, investors filed class actions in the United States, South Korea and Singapore, alleging that Kwon and Terraform Labs misled them and sold unregistered securities. A civil jury in New York later found Kwon and the company liable for defrauding investors, concluding that he misrepresented both the mechanism that restored TerraUSD’s peg in 2021 and the extent to which the Terra blockchain was used by a major South Korean payments app.