In a landmark ruling that sends shockwaves through the cryptocurrency industry, former digital currency entrepreneur Do Kwon has been sentenced to 15 years imprisonment for orchestrating what federal prosecutors describe as an “epic, generational” financial fraud. The sentencing by New York District Judge Paul A. Engelmayer concludes a dramatic case involving the catastrophic collapse of two interconnected cryptocurrencies that wiped out approximately $40 billion in investor funds.
The South Korean national, who co-founded Singapore-based Terraform Labs, admitted to systematically misleading investors about the stability and mechanics of TerraUSD—a so-called stablecoin designed to maintain parity with the US dollar. The sophisticated scheme unraveled in 2022 when both TerraUSD and its sister currency Luna experienced catastrophic failure, triggering widespread repercussions across the cryptocurrency market and contributing to the collapse of several digital asset companies.
During Thursday’s emotionally charged hearing in Manhattan federal court, Judge Engelmayer delivered scathing remarks about the Stanford-educated entrepreneur’s conduct. “In the annals of federal prosecutions, there are few frauds that have inflicted comparable financial devastation,” the judge stated, emphasizing how Kwon had repeatedly deceived investors who placed their trust in his technological expertise.
Court documents reveal that when TerraUSD initially dropped below its promised $1 valuation in May 2021, Kwon allegedly instructed a trading firm to secretly purchase massive quantities of the digital coin to artificially inflate its price—while publicly attributing the recovery to sophisticated computer algorithms. This manipulation created a false appearance of stability that prolonged the scheme until its inevitable collapse.
Kwon, who pleaded guilty in August to conspiracy to defraud and wire fraud charges, expressed contrition during the proceedings. “I have devoted nearly every waking moment of recent years contemplating alternative actions and seeking ways to rectify the damage caused,” the disgraced entrepreneur told the court.
The case represents one of the most significant prosecutions in the ongoing regulatory crackdown on cryptocurrency misconduct, establishing a crucial legal precedent for holding digital asset creators accountable for fraudulent representations about their products’ stability and underlying technology.