NEW YORK – Terraform Labs co-founder Do Kwon was sentenced Wednesday to 15 years in prison for his role in a massive fraud that saw around $50 billion wiped from the crypto ecosystem in 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 more than the 12-year sentence requested by prosecutors and much greater than the five-year sentence proposed by Kwon’s lawyers. Kwon must serve at least half of that sentence before he can apply for a transfer to South Korea, where he faces additional charges.
The judge’s ruling followed a lengthy hearing in which victims testified both in person and by phone about how Terra’s collapse affected them or their families.
Read more: Kwon’s sentencing drags out 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 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 in fact defrauded” buyers of the TerraUSD (UST) stablecoin.
Under Kwon’s leadership, Terraform Labs was the first well-known domino to fall in the 2022 crypto collapse, which triggered a cascade of liquidations and wipeouts that ended with the implosion of once-mighty FTX in November 2022. Former FTX boss Sam Bankman-Fried is currently serving a 25-year prison sentence for fraud and embezzlement. Mashinsky, founder of the bankrupt crypto-lending platform Celsius Network, is currently serving a 12-year prison sentence for fraud.
In exchange for Kwon’s guilty plea this summer, prosecutors cut the original nine-count indictment — in which Kwon faced a maximum sentence of 135 years in prison if convicted on all counts — to just two, with Kwon facing a maximum combined sentence of 25 years in prison. However, as part of the plea deal, prosecutors agreed to recommend a sentence of just 12 years in prison and, once Kwon has served half of his final sentence, to support any motion he makes for an international prison transfer back to South Korea.
Kwon’s potential transfer back to his home country appeared to worry Engelmeyer, who asked in a pre-sentence hearing what “assurance” the United States would have that Kwon would not be released before the end of his prison sentence. Engelmeyer also pressed both prosecutors and Kwon’s defense attorneys for answers to other questions, including whether Kwon still faced pending criminal charges in South Korea and whether he should receive credit for the 17 months he served in Montenegrin custody before he was finally extradited to the United States in January.
In a written response filed in court Wednesday, prosecutors said they had no information about the charges in South Korea, but that their counterparts in South Korea had said they could not say what punishment they intended to seek, but that it appeared Kwon would fight his charges there.
The memo also said the Bureau of Prisons would give Kwon credit for the time he spent in a Montenegrin prison “in addition to the four-month period he served for his separate passport fraud crime,” though there is no agreement on how much credit he would specifically receive.
