Do Kwon Sentenced to 15 Years for $40 Billion Crypto Fraud
Do Kwon, the former cryptocurrency mogul, was sentenced to 15 years in prison for his role in a $40 billion fraud scheme. The sentencing occurred in Manhattan federal court, where Judge Paul A. Engelmayer labeled the fraud as “epic” and “a fraud on a generational scale.” Victims expressed their despair, stating that Kwon’s deception led to devastating financial losses.
Details of the Case
On March 2023, Kwon was arrested in Montenegro and was later extradited to the United States. He had co-founded Terraform Labs, a firm responsible for the collapse of its cryptocurrency, TerraUSD. Kwon pleaded guilty in August to various fraud charges related to this collapse. Alongside his prison sentence, he agreed to forfeit over $19 million as part of his plea deal.
Victims’ Accounts
During the hearing, victims shared their heart-wrenching experiences. Many described how the collapse of TerraUSD and its related currency, Luna, devastated their lives.
- One victim lost nearly $11,400, which he described as years of hard work.
- Another victim, Stanislav Trofimchuk, saw his family’s investment sour from $190,000 to just $13,000.
- Chauncey St. John revealed that nonprofit organizations he worked with lost over $2 million.
Many victims highlighted the personal toll of the fraud. One stated he contemplated suicide due to the financial strain. Others faced relationship difficulties, debt, and an uncertain future.
Judge’s Remarks
Judge Engelmayer criticized both the defense’s request for a mere five-year sentence and the government’s initial recommendation of 12 years, calling it “unreasonably lenient.” Kwon sat in a jail suit as the judge made it clear that the effects of his actions had caused “human wreckage.” Engelmayer noted that Kwon’s offenses led to a far greater loss than previous notorious fraud cases like FTX and OneCoin.
Fraud Mechanism
Terraform Labs marketed TerraUSD as a “stablecoin,” a type of cryptocurrency typically pegged to stable assets. However, prosecutors revealed that this was an illusion, undermined by external cash inflows. When the value of TerraUSD dropped significantly below its intended value, the cryptocurrency market experienced widespread turmoil.
Kwon’s Justification
While Kwon’s lawyers claimed his actions stemmed from hubris rather than greed, Judge Engelmayer disagreed. He rejected Kwon’s plea to serve his sentence in South Korea, where he faces additional charges. Kwon expressed remorse during the hearing, stating, “I have spent almost every waking moment reflecting on my actions.”
Conclusion
The fallout from Kwon’s fraudulent activities affected approximately a million victims, who suffered severe financial and emotional distress. The court’s decision to impose a 15-year sentence underscores the severity of the crime perpetrated by Kwon and the lasting impact on those who trusted his promises.
