NEW YORK — Terraform Labs co-founder Do Kwon was sentenced Wednesday to 15 years in prison for his role in a massive fraud that resulted in approximately $50 billion disappearing from the crypto ecosystem in just three days in May 2022.
The sentence, handed down by Judge Paul Engelmeyer of the Southern District of New York (SDNY), is slightly higher than the 12-year sentence sought by prosecutors and well above the five-year term suggested by Kwon’s attorneys. Kwon must serve at least half of his sentence before he can request transfer to South Korea, where he faces other charges.
The judge’s sentence followed a lengthy hearing, during which victims testified 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 commodities fraud, securities fraud and wire fraud, as well as 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 engaged in a fraud scheme and did, in fact, defraud” buyers of the TerraUSD (UST) stablecoin.
Under Kwon’s leadership, Terraform Labs was the first proverbial domino to fall in the 2022 crypto collapse, triggering a cascade of liquidations and wipeouts that ended with the implosion of the mighty FTX in November 2022. Former FTX CEO Sam Bankman-Fried is currently serving a 25-year prison sentence for fraud exposed during the stock market collapse, and Alex Mashinsky, founder of bankrupt crypto 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 faced 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 request he makes for an international prison transfer to South Korea.
Kwon’s possible transfer to his homeland appeared to worry Engelmeyer, who asked in a court filing before the sentencing what “assurance” the United States would have that Kwon would not be released before the end of his prison term. Engelmeyer also asked 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 be given credit for the 17-month stint he spent in custody in Montenegro before ultimately being 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 their counterparts in South Korea said they could not disclose the 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 time he spent in a Montenegrin prison “beyond the four-month period he served for his other crime of passport fraud,” although there was no agreement on how much credit he would receive specifically.
