On December 11, 2025, a New York federal court sentenced Do Kwon, co-founder of Terraform Labs, to 15 years in prison for orchestrating what the presiding judge described as an “epic fraud” linked to the collapse of TerraUSD (UST) and Luna, resulting in investor losses of approximately $40 billion. Kwon, who previously pleaded guilty in August to conspiracy to defraud and wire fraud, admitted to misleading investors with false claims about a computer algorithm restoring the stablecoin’s $1 peg. Instead, evidence showed that Kwon secretly arranged for a trading firm to prop up TerraUSD’s value.
During the sentencing hearing, U.S. District Judge Paul Engelmayer rebuked Kwon for betraying retail and institutional investors alike, noting that the collapse triggered a cascade of losses across the broader crypto ecosystem and undermined market stability. Hundreds of victim impact statements described devastating financial ruin, prompting Kwon to express remorse. Prosecutors had sought a 12-year term, citing the magnitude of losses and the systemic risk posed by the collapse, while Kwon’s defense had argued for a lighter five-year sentence to allow his return to South Korea for related proceedings.
The ruling underscores heightened judicial scrutiny of cryptocurrency fraud and the enforcement priority assigned to high-profile collapses. Kwon’s sentence follows parallel actions by the U.S. Securities and Exchange Commission, which imposed an $80 million civil fine and a lifetime trading ban. The case serves as a warning to digital asset entrepreneurs regarding regulatory compliance and the legal consequences of deceptive practices.
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