United States federal prosecutors are seeking a possible 12-year prison term for Terraform Labs co-founder Do Kwon. Prosecutors are seeking that penalty because they believe the TerraUSD disaster was a “colossal fraud.”
The United States government told Judge Paul Engelmayer in New York that the crime was massive enough to wreck entire corners of the crypto industry, from retail investors to exchanges like FTX, which crumbled shortly after. The sentencing is locked in for December 11, where Judge Engelmayer will decide the fate of the Terraform Labs co-founder. The prosecutors want a harsh sentence because, as they told the court.
United States feds want a 12-year sentence for Do Kwon
Do Kwon lied to users, a development that triggered a chain reaction that led to the infamous $40 billion wipeout. He tried to cut his punishment short. In a separate filing last week, he said five years would be enough. He had already pleaded guilty in August to both conspiracy and wire fraud, with the United States government offering him a deal that capped the sentence at no more than 12 years.
That deal also mandated him to hand over $19.3 million and some of his properties. The government made it clear it is not pursuing restitution, saying it would be too messy to figure out the exact losses for the millions of people who lost money. His legal issues are not limited to the United States. After he was caught using a fake passport in Montenegro in 2023, authorities from South Korea and the United States fought over who would get him first.
He ended up being extradited to the United States in January, after spending nearly two years locked up in Montenegro over the passport charges. Despite that, United States officials say they will support transferring him to South Korea for the second half of his sentence, but only if he keeps his end of the plea deal and qualifies under an international inmate transfer program.
The case is landing at a strange moment for crypto enforcement. While Do Kwon’s sentence is being pushed hard by prosecutors, the broader crackdown seems to be losing steam. In October, Donald Trump pardoned Changpeng Zhao, the Binance founder, who was convicted of running the world’s largest crypto exchange without proper anti-money-laundering controls.
The difference in how these two cases are being handled hasn’t gone unnoticed in the crypto world. While Zhao walked, Do Kwon might get locked up for over a decade if the United States government gets its way. And with billions lost, no restitution planned, and no clear fix for the victims, the court’s decision next week is likely to set the tone for how hard the US plans to come down on failed crypto founders.
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