From Forbes 30 Under 30 to Prison: Terraform Founder Do Kwon’s $40 Billion Crypto Empire Collapses with 15-Year Jail Term
NEW YORK, Dec 12 — Do Kwon, the South Korean cryptocurrency entrepreneur and co-founder of Terraform Labs, has been sentenced to 15 years in prison by a US court for fraud related to one of the most significant collapses in crypto history. The downfall of Kwon’s company wiped out approximately US$40 billion (about RM165 billion) in investors’ funds and sent shockwaves throughout the global cryptocurrency markets.
The court ruling comes after Kwon pleaded guilty in New York in August following an extensive international manhunt that spanned Asia and Europe. Kwon, 34, still faces additional fraud charges in his native South Korea.
Terraform Labs was the creator of TerraUSD, a cryptocurrency marketed as a “stablecoin”—a digital asset designed to maintain a stable value by being pegged to a reserve asset like the US dollar. Kwon successfully promoted TerraUSD and its sister coin, Luna, as revolutionary innovations in the crypto space, attracting billions of dollars in investment and widespread attention.
At his peak, Kwon was widely celebrated in South Korean media and appeared on Forbes magazine’s prestigious “30 Under 30 Asia” list in 2019. Thousands of private investors enthusiastically supported his venture, believing in the promise of stable and innovative digital currencies.
However, in May 2022, the value of TerraUSD and Luna began a rapid and catastrophic decline. Experts have since described the scheme as a glorified pyramid, severely impacting countless investors, many of whom lost their life savings.
Following the crypto crash, Kwon fled South Korea and was on the run for several months. He was apprehended in March 2023 at Podgorica airport in Montenegro while attempting to board a flight to Dubai. Authorities arrested him after discovering he was in possession of a fraudulent Costa Rican passport. He was subsequently extradited to the United States last year to face prosecution.
During Thursday’s sentencing, US prosecutors outlined how Kwon deliberately misled investors and inflated the value of Terraform’s cryptocurrencies for personal gain. At its height in early 2022, the combined market valuation of TerraUSD and Luna exceeded US$50 billion.
“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 in a statement. The prosecutors also revealed that Kwon sought political protection from various countries while under investigation. A recorded conversation was cited in which Kwon instructed an associate to dismiss authorities investigating the collapse in blunt terms.
In addition to the prison sentence, Kwon was ordered to forfeit over US$19 million obtained from his fraudulent activities. The US Justice Department noted that Kwon might be allowed to serve part of his sentence in South Korea, provided he completes at least half of the term in the United States.
This case highlights the growing scrutiny that cryptocurrencies face globally, especially following high-profile scandals and exchange bankruptcies. Kwon’s dramatic rise and fall have drawn comparisons to Elizabeth Holmes, the disgraced founder of the failed biotech startup Theranos.
The repercussions of Kwon’s conviction mark a significant moment in the ongoing effort to enforce regulatory standards in the cryptocurrency industry and protect investors from fraudulent schemes.
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