Former cryptocurrency mogul Do Kwon was sentenced to 15 years in prison on Thursday after a $40 billion market crash revealed fraud in his crypto ecosystem. Victims said the 34-year-old fintech genius weaponized their trust to convince them that investments, secretly backed by cash injections, were safe, UNN reports, citing AP.
Details
Kwon, a Stanford graduate known to some as the "crypto king," apologized after hearing from victims — one in court, others by phone — as they described the consequences of the fraud: destroyed savings, depleted charitable funds, and ruined lives. One of them, in a letter, told the judge that he had contemplated suicide after his father lost his retirement money in the scheme.
Judge Paul A. Engelmayer said at a day-long sentencing hearing in Manhattan federal court that the government's recommendation of 12 years in prison was "unreasonably lenient," and the defense's request for five years was "utterly unthinkable and extremely unreasonable." Kwon faced a maximum sentence of 25 years in prison.
"Your crime caused real people to lose $40 billion of real money, not some paper loss," Engelmayer told Kwon, who sat at the defense table in a yellow prison jumpsuit. The judge called it "a fraud of epic, generational proportions" and said Kwon had "an almost mystical influence" over investors and caused untold "human harm."
Kwon agreed to forfeit more than $19 million as part of a plea agreement. His lawyers argued that his conduct was driven not by greed, but by hubris and desperation. Engelmayer denied his request to serve his sentence in his native South Korea, where he also faces prosecution and where his wife and 4-year-old daughter live.
"I have thought almost every minute of the last few years about what I could have done differently and what I can do now to make things right," Kwon told Engelmayer. He said hearing from the victims was "horrible and reminded me again of the great losses I caused."
Addition
In August, Kwon pleaded guilty to fraud related to the collapse of Terraform Labs, a Singaporean firm he co-founded in 2018. According to prosecutors, the losses exceeded the combined losses from the fraud of FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood. Engelmayer estimated that there could have been a million victims.
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Terraform Labs advertised its TerraUSD as a reliable "stablecoin" — a type of currency typically pegged to stable assets to prevent sharp price fluctuations. But prosecutors say it was an illusion, backed by external cash injections, that collapsed after it fell significantly below its $1 peg. The collapse devastated investors in TerraUSD and its floating sister currency Luna, triggering "a cascade of crises that swept through cryptocurrency markets."
Kwon tried to rebuild Terraform Labs in Singapore before fleeing to the Balkans with a fake passport, prosecutors said. He has been in prison since his arrest in Montenegro in March 2023. He was credited with the 17 months he spent in prison before being extradited to the US.