NEW YORK — Terraform Labs co-founder Do Kwon was sentenced to 15 years in prison on Wednesday for his role in a massive fraud that saw roughly $50 billion wiped from the crypto ecosystem over the course of just three days in May 2022.
The sentence, handed down by District Judge Paul Engelmeyer of the Southern District of New York (SDNY) is slightly more than the 12-year sentence requested by prosecutors and much greater than the five-year sentence suggested by Kwon’s lawyers. Kwon must serve at least half of this sentence before he can apply for a transfer to South Korea, where he faces further charges.
The judge’s sentence followed a lengthy hearing, with victims testifying both in-person and via phone about how Terra’s collapse affected them or their families.
Read more: Do Kwon’s Sentencing Hearing Drags on as Court Weighs Mountain of Victim Testimony
In August, Kwon pleaded guilty to one count of conspiring to commit commodities fraud, securities fraud, and wire fraud, and one count of committing wire fraud in connection with fraudulent schemes at Terraform Labs. During his plea hearing before Judge Engelmeyer, the South Korean national admitted that he “knowingly engaged in a scheme to defraud and did, in fact, defraud” purchasers of the TerraUSD (UST) stablecoin.
Under Kwon’s leadership, Terraform Labs was the first proverbial domino to fall in the 2022 crypto collapse, triggering a cascade of liquidations and wipeouts that ended with the implosion of once-mighty FTX in November 2022. Former FTX CEO Sam Bankman-Fried is currently serving a 25-year prison sentence for fraud revealed in the exchange’s collapse, and Alex Mashinsky, founder of bankrupt crypto lending platform Celsius Network, is currently serving a 12-year sentence for fraud.
In exchange for Kwon’s guilty plea this summer, prosecutors slashed the original nine-count indictment — under which Kwon faced a maximum sentence of 135 years in prison if convicted on all counts — to just two, under which Kwon faces a maximum combined sentence of 25 years in prison. However, as part of the plea agreement, prosecutors agreed to recommend a sentence of just 12 years in prison and, once Kwon has served half of his ultimate sentence, to support any motion he makes for an international prison transfer back to South Korea.
Kwon’s potential transfer back to his native country appeared to concern Engelmeyer, who asked in a court filing ahead of the sentencing what “assurance” the U.S. would have that Kwon would not be released before the end of his prison sentence. Engelmeyer also pressed both prosecutors and Kwon’s defense attorneys for answers to other questions, including whether Kwon was still facing pending criminal charges in South Korea, and whether he should receive credit for the 17-month stint he did in Montenegrin custody before he was finally extradited to the U.S. in January.
In a written response filed to the court Wednesday, prosecutors said they did not have any information about the charges in South Korea, but that their counterparts in South Korea had said they could not disclose what punishment they intended to seek, but that it appeared Kwon would be fighting his charges there.
The memo also said that the Bureau of Prisons would give Kwon credit for the time he spent in a Montenegrin prison “in excess of the four-month period he served for his separate passport fraud crime” there, though there is no agreement about how much credit he would specifically receive.