Do Kwon, the South Korean co-founder of the collapsed cryptocurrency firm Terraform Labs, has been sentenced to 15 years in prison in connection with a $40 billion fraud case tied to the company’s digital assets.
Do Kwon’s downfall
US prosecutors said Kwon was sentenced on Thursday in New York after being convicted of wire fraud and conspiracy to commit securities fraud, commodities fraud, and wire fraud.
Between 2018 and 2022, Kwon orchestrated schemes that defrauded investors in Terraform Labs’ cryptocurrencies, according to the US Attorney’s Office for the Southern District of New York. Prosecutors said Kwon falsely promoted Terraform’s ecosystem as a stable and decentralized financial system, while concealing structural flaws in its design.
At the center of the case was TerraUSD, a stablecoin that was marketed as being pegged to the US dollar. Investigators found that the peg, along with the value of Terraform’s Luna token, was inherently unstable. Both assets collapsed in May 2022, wiping out more than $40 billion in investor value and triggering one of the largest failures in crypto history. Terraform Labs later filed for bankruptcy in 2024.
Kwon pleaded guilty in August 2025 after being extradited to the United States on December 31, 2024. In addition to his prison sentence, he was ordered to pay more than $19 million in penalties.
A separate civil fraud case in the US was launched in March 2024, following Kwon’s release from prison in Montenegro, where he had been detained on passport forgery charges stemming from a case that began in 2023.
Once considered a rising star in the industry, Kwon was named to Forbes’ 30 Under 30 Asia list in 2019 in the finance and venture capital category. He founded Terraform Labs in 2018, and the company raised $32 million from investors including Binance.
Key quote
“Do Kwon devised elaborate schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit,” said US Attorney Jay Clayton.
Crypto fraud cases
The sentencing highlights the growing regulatory and legal scrutiny facing the cryptocurrency industry.
In recent years, several high-profile figures have faced criminal penalties, including the founders and executives of major crypto firms. In 2024, former FTX executives Sam Bankman-Fried and Caroline Ellison were sentenced to prison on fraud-related charges following the exchange’s collapse. Earlier cases have also targeted crypto-related market manipulation and deceptive investment schemes, underscoring authorities’ efforts to rein in misconduct across the sector.
