TL;DR
- Kwon received a 15-year sentence in the US, but the case remains open because South Korea is preparing a separate trial that could impose more than 30 additional years.
- Korean prosecutors seek to try him for violations of the Capital Markets Act, following losses of $204 million that affected about 200,000 local victims.
- The case proved that Terraform Labs concealed covert purchases to support TerraUSD, a scheme that collapsed in 2022 and wiped out nearly $40 billion.
Do Kwon received a 15-year prison sentence in the United States over the collapse of TerraUSD and Luna, but his legal situation remains unresolved and points to a second criminal process in South Korea.
The ruling was handed down by federal judge Paul Engelmayer in Manhattan, after a case that proved a fraud scheme between 2018 and 2022. The investigation found that Terraform Labs concealed external interventions to artificially support TerraUSD’s peg, while Do Kwon publicly claimed the system operated autonomously. The final collapse in May 2022 erased nearly $40 billion and triggered a chain reaction that reached other companies across the crypto market.
However, South Korean prosecutors are maintaining separate charges for violations of the Capital Markets Act and are signaling a potential sentence exceeding 30 years. The core argument is that a domestic trial allows authorities to address the damage suffered by about 200,000 victims in the country, with estimated losses of 300 billion won, equivalent to $204 million. Ten of Kwon’s associates have already been standing trial in Seoul for nearly three years.
Kwon May Request a Transfer to Korea After Serving Half His Sentence
This scenario rests on the fact that, after serving half of his US sentence, Kwon can apply to the International Prisoner Transfer Program. As part of his plea agreement, US prosecutors would not block such a request. If the transfer goes through, Korea can prosecute him without taking into account the sentence imposed in New York. Engelmayer explicitly rejected reducing the sentence on that basis and stated that a court cannot sentence based on potential decisions by another jurisdiction.
The case also revealed that, when TerraUSD lost its peg in May 2021, Terraform Labs relied on covert purchases through a firm linked to Jump Trading. That intervention temporarily supported the price and was never disclosed to investors. A year later, the system collapsed without backing and dragged down funds, platforms, and projects connected to the Terra ecosystem.
The Minimum Viable Sentence
Kwon pleaded guilty to nine counts, including fraud and money laundering. The judge also ordered the forfeiture of $19 million in illicit gains. Federal guidelines pointed to a theoretical sentence of up to 130 years, but the plea deal capped the prosecution’s recommendation at 12. The court imposed 15 and defined it as the minimum viable sentence in the face of a fraud it described as one of the most damaging in recent history
