U.S. federal prosecutors have recommended that Terraform Labs founder Do Kwon receive at least 12 years in prison for his role in the $40 billion collapse of the Terra ecosystem. Kwon’s lawyers had asked for a five-year term, but prosecutors said the scale of the harm calls for a stiffer sentence to deter similar conduct.
Kwon, a 34-year-old South Korean, pleaded guilty as part of a deal in August to conspiracy to commit fraud and wire fraud. Though his offenses carried a statutory maximum of about 25 years, prosecutors agreed to seek up to 12 years under the plea agreement and have now urged the court to impose a sentence on the higher end of that range.
In a sentencing submission to U.S. District Judge Paul Engelmayer in Manhattan, Department of Justice attorneys argued a substantial term is needed to avoid “unwarranted sentencing disparities” with other major crypto fraud cases. They cited the 25-year sentence given to FTX founder Sam Bankman‑Fried after his conviction, and rejected Kwon’s team’s suggestion that he receive a significantly shorter sentence than figures such as Celsius founder Alex Mashinsky, who was sentenced to 12 years earlier this year.
Prosecutors say Kwon misled investors about the risks and stability of the algorithmic stablecoin UST and its sister token LUNA. In 2022, UST and LUNA collapsed to near zero, wiping out more than $40 billion and triggering a broader market contagion that contributed to multiple crypto firm failures. The filing asserts Kwon deprived purchasers of the information needed to make informed decisions and artificially boosted the value of Terraform’s tokens, enriching himself and enhancing his public profile.
After the crash, Kwon fled and was arrested in Montenegro in 2023 while attempting to travel on a forged passport. Following a prolonged jurisdictional dispute, he was extradited to New York earlier this year.
“Kwon’s misconduct, the consequences of his crime, and his reaction to the discovery of his scheme all warrant a substantial prison term,” prosecutors wrote, adding that the facts of the offense alone would support the maximum sentence. Kwon’s sentencing is scheduled for December 11 in Manhattan.
