Do Kwon, the founder of Terraform Labs, has been sentenced to 15 years in prison in the Southern District of New York for Vai in the collapse of the LUNA and TerraUSD ecosystems, an event that wiped out approximately $40 billion from the cryptocurrency market in 2022. This is XEM one of the biggest disasters in crypto history, creating a domino effect that led to the bankruptcy of many investment funds, exchanges, and related projects.
The verdict was handed down this Thursday, according to Inner City Press, and even exceeded the prosecution's earlier recommendation. Initially, US prosecutors considered a 12-year sentence appropriate, based on the scale of the fraud and the wrongdoings Kwon was accused of. However, Do Kwon's lawyers proposed a maximum sentence of 5 years, arguing that the Terra -Luna crash was partly triggered by deliberate transactions from outside organizations to exploit system vulnerabilities, based on academic research and data analysis from Chainalysis.
In the courtroom, Judge Paul Engelmayer emphasized that Do Kwon “chose to lie” and “chose wrongdoing,” reflecting the seriousness of the offense. Kwon was previously indicted in March 2023 on a series of charges, including conspiracy to commit fraud, securities fraud, commodity fraud, wire fraud, market manipulation, and money laundering. By August 2024, Kwon had pleaded guilty to two charges related to wire fraud and conspiracy to commit fraud, significantly reducing his maximum sentence from 135 years to 25 years as part of a plea agreement.
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The case revolves around TerraUSD – an Algorithmic Stablecoin designed to self-regulate its price through market mechanisms closely linked to the Luna Token . However, this model proved unsustainable under immense pressure, leading to a death spiral: TerraUSD lost its pivot point, Luna was diluted indefinitely, and the entire system collapsed within days. Prosecutors assert that Do Kwon deceived investors by exaggerating the stability and security of the mechanism and concealing serious risks.
