The co-founder of Terraform Labs, Do Kwon, could be locked up for an additional 30 years in prison if he goes to trial in South Korea.
Do Kwon was sentenced to 15 years in a U.S. prison after pleading guilty to wire fraud. He can apply to be transferred to South Korea in seven and a half years, but if convicted there, he could spend 30 additional years in jail.
Do Kwon could face additional jail time
Do Kwon, the 34-year-old co-founder of Terraform Labs, could face the possibility of spending decades more in prison after completing his U.S. sentence.
Cryptopolitan reported that a Manhattan federal court sentenced him to 15 years last Thursday, and now, South Korean prosecutors are preparing a separate trial on charges including violations of the Capital Markets Act that could add over 30 years to his total time behind bars.
Do Kwon was convicted on nine counts, including fraud and money laundering, after TerraUSD collapsed in 2022 and Luna wiped out an estimated $40 billion in investor funds worldwide. U.S. District Judge Paul Engelmayer called it a fraud on an “epic, generational scale” during the sentencing hearing.
Kwon pleaded guilty in August to conspiracy to commit fraud and wire fraud as part of a plea bargaining agreement. While prosecutors requested 12 years and his defense team argued for five years, Judge Engelmayer imposed 15 years, saying the government’s recommendation was “unreasonably lenient” and the defense request was “utterly unthinkable.”
The Seoul Southern District Prosecutors’ Office obtained an arrest warrant for Kwon in September 2022 through their joint financial crimes unit. South Korean authorities estimate there are roughly 200,000 victims in the country, with total losses of about 300 billion won, equivalent to $204 million.
Ten alleged accomplices have been on trial in Korea for nearly three years while authorities awaited Kwon’s potential return.
As part of Do Kwon’s plea deal, U.S. prosecutors agreed not to oppose him if, after he serves half of his 15-year sentence, he applies to be transferred to Korea through the International Prisoner Transfer Program.
During his U.S. sentencing hearing, Kwon’s defense team argued that the court should consider that he could still be prosecuted in South Korea as a reason to lessen his sentence to five years.
Judge Engelmayer said that one court cannot base its ruling on guesses about what another court might decide. He also denied Kwon’s request to serve his sentence in South Korea, where his wife and four-year-old daughter live.
How did the Terra-Luna collapse happen?
In spring 2022, the total market value of TerraUSD and Luna exceeded $50 billion. The collapse happened rapidly over just three days, starting when TerraUSD lost its dollar peg on May 9, 2022.
The algorithmic stablecoin model that Terra used proved to be fundamentally flawed. Rather than using collateralized stablecoins backed by actual assets, Terra relied on an arbitrage mechanism with its sister token Luna to maintain stability. And as investors lost confidence, Luna tokens flooded the market, driving prices down even further.
Research from MIT Sloan found that the collapse was the result of the Anchor protocol, which offered high interest rates of around 20% to UST depositors. By April 2022, $6 million was required daily to maintain the rates.
Victims who testified at Kwon’s sentencing described losing their life savings, retirement funds, and even contemplating suicide. One victim told the court his wife divorced him, his sons had to skip college, and he was forced to move back to Croatia to live with his parents.
Another said he lived with the guilt of persuading his in-laws and hundreds of nonprofit organizations to invest.
Kwon was arrested in Montenegro in March 2023 on charges of possessing forged documents. He spent nearly two years detained there before being transferred to the United States on December 31, 2024.
In addition to his prison sentence, Kwon was ordered to forfeit over $19 million in illicit gains. He also agreed in 2024 to pay $80 million as a civil fine and be banned from crypto transactions as part of a $4.55 billion settlement that he and Terraform Labs reached with the U.S. Securities and Exchange Commission.
He apologized during his sentencing, telling Judge Engelmayer, “I have spent almost every waking moment of the last few years thinking of what I could have done differently and what I can do now to make things right.” Hearing from victims, he said, was “harrowing and reminded me again of the great losses that I have caused.”
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Source: https://www.cryptopolitan.com/terraform-do-kwon-sentence-in-south-korea/
