Do Kwon jailed for 15 years for massive $40B crypto fraud
Former cryptocurrency tycoon Do Kwon was sentenced on Thursday to 15 years in prison after the collapse of his $40 billion crypto empire exposed the entire system as fraudulent.
Victims told the court the 34-year-old fintech entrepreneur exploited their trust, assuring them their investments were secure while secretly sustaining the scheme with hidden cash injections, News.Az reports, citing CNN.
Kwon, a Stanford graduate once dubbed “the cryptocurrency king,” apologized after hearing emotional accounts from victims — some in the courtroom and others by phone — who described the devastating consequences of the fraud, including lost life savings, depleted charities, and shattered futures. One victim wrote to the judge that he had contemplated suicide after his father’s retirement fund was wiped out.
During the full-day sentencing hearing in Manhattan federal court, Judge Paul A. Engelmayer rejected the government’s recommended 12-year sentence as “unreasonably lenient,” and dismissed the defense’s request for a five-year term as “utterly unthinkable and wildly unreasonable.” Kwon had faced up to 25 years in prison.
Engelmayer told Kwon that his crimes caused “real people to lose $40 billion in real money, not some paper loss.” He described the scheme as “a fraud on an epic, generational scale,” saying Kwon held an “almost mystical” influence over investors and left behind immeasurable “human wreckage.”
Kwon pleaded guilty in August to fraud charges stemming from the collapse of Terraform Labs, the Singapore-based firm he co-founded in 2018. The loss exceeded the combined losses from FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood’s frauds, prosecutors said. Engelmayer estimated there may have been a million victims.
Terraform Labs had touted its TerraUSD as a reliable “stablecoin” — a kind of currency typically pegged to stable assets to prevent drastic fluctuations in prices. But prosecutors say it was an illusion backed by outside cash infusions that came crumbling down after it plunged far below its $1 peg. The crash devastated investors in TerraUSD and its floating sister currency, Luna, triggering “a cascade of crises that swept through cryptocurrency markets.”
Kwon tried to rebuild Terraform Labs in Singapore before fleeing to the Balkans on a false passport, prosecutors said. He’s been locked up since his March 2023 arrest in Montenegro. He was credited for 17 months he spent in jail there before being extradited to the U.S.
Kwon agreed to forfeit over $19 million as part of his plea deal. His lawyers argued his conduct stemmed not from greed, but hubris and desperation. Engelmayer rejected his request to serve his sentence in his native South Korea, where he also faces prosecution and where his wife and 4-year-old daughter live.
“I have spent almost every waking moment of the last few years thinking of what I could have done different and what I can do now to make things right,” Kwon told Engelmayer. Hearing from victims, he said, was “harrowing and reminded me again of the great losses that I have caused.”
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