On December 11, 2025, in the Manhattan federal court, Terraform Labs co-founder Do Kwon was sentenced to 15 years in prison for fraud involving the cryptocurrency TerraUSD ($USTC ) and $LUNA , which led to investor losses of $40 billion. Judge Paul Engelmayer called the crime "an epic fraud of generational scale," emphasizing that Kwon "created an illusion of stability while concealing systemic flaws." Prosecutors sought 12 years, defense attorneys argued for 5, but the judge dismissed both options as "too lenient," citing a million victims and "irreparable harm."
Kwon, a 34-year-old Stanford graduate, pleaded guilty in August 2025 to conspiracy to commit fraud and wire fraud. He promised that TerraUSD was a stablecoin with an algorithmic peg of $1, but secretly supported the price with cash infusions from trading firms. In May 2022, the Terra Protocol algorithm failed, UST collapsed, triggering a cascade of crises: bankruptcies of exchanges, losses of $40 billion — more than in the FTX and OneCoin scandals combined. Kwon tweeted "deploying more capital — hang in there, guys," but the market vanished.
Arrested in 2023 in Montenegro for a fake passport, Kwon has been extradited to the USA. He will also have $19 million in profits confiscated, and the second half of his sentence may be served in Korea, where another case is ongoing. Victims, such as a student who lost $11,000 for college tuition, sent 300 letters to the court.
This sentence is a warning for the crypto industry: innovation does not justify deception. The Terra crash was a turning point, intensifying regulation.
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