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Against the backdrop of the collapse of the “TerraUSD” and “Luna” currencies, the declining chapter of the “Terra” project ended with the sentencing of the project’s founder “Do Kwon” to 15 years in prison.
I have considered Kwon committed unprecedented fraud after pleading guilty in Manhattan federal court to misleading investors about the mechanism for stabilizing a currency that was promoted as a safe haven during times of market volatility.
Judge Paul Engelmayer confirmed that the extent of the losses caused by Kwon is believed to be the largest in the history of federal fraud cases, as the collapse of both currencies in 2022 resulted in approximately $40 billion in losses, destabilizing the cryptocurrency industry and causing multiple companies to go bankrupt.
During the meeting, Kwon apologized to the victims and hundreds submitted written statements about their financial and psychological losses, including one investor who lost nearly $500,000 in savings.
Prosecutors explained that Kwon deliberately manipulated the value of digital tokens and secretly turned to high-frequency trading firms to intervene when TerraUSD lost its peg to the U.S. dollar, while publicly attributing the recovery to the project’s automated stabilization system.
Although nine criminal charges were filed against him, including securities, communications and commodities fraud and money laundering, he ultimately pleaded guilty to two counts of conspiracy to commit fraud and wire fraud.
The prosecution sought a sentence of no less than 12 years, while the defense sought to limit its own sentence to five years.
In addition to the criminal verdict, Kwon previously agreed to pay an $80 million civil penalty as part of a major settlement with the U.S. Securities and Exchange Commission and was prohibited from engaging in any cryptocurrency-related activity.
The plea deal also allows him to be transferred outside the United States after serving half of his sentence, which could open the door for him to be prosecuted in South Korea.
Kwon’s case has cast new light on his behavior before his collapse, when he was known for his provocative style and ridicule of critics, which he later admitted he exaggerated and built his public image through “entertainment.”
Although he admits responsibility for the Terra project’s design failures, he still believes some of his country’s accusations are politically motivated.
“Fatman Terra”, an anonymous investigator who contributed to solving the case, believes that what happened confirms that accountability may be delayed, but is not impossible. He pointed out that the world of cryptocurrency is full of fraud, many of whose perpetrators survive, but systematic and legal pursuit can ultimately bring justice.
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