The founder of Terraform Labs, Do Kwon, has been sentenced to 15 years in federal prison for his role in the collapse of the Terra (LUNA) ecosystem.
The Terra implosion erased more than $40 billion in market value and shook the global cryptocurrency industry in 2022.
Do Kwon Sentencing
The sentencing was handed down in Manhattan by U.S. District Judge Paul Engelmayer, who rejected requests from both prosecutors and the defense.
According to the report, federal prosecutors had pushed for a 12-year prison term, while Kwon’s legal team argued for a much lighter five-year sentence. The judge dismissed both proposals, saying neither adequately reflected the scale of the damage caused.
“…15 years is the least I can impose. Mr. Kwon, please rise… It is the judgment of the court that you are to serve a sentence of 15 years, with credit for time serviced in the US – and 17 months and 8 days served in pre-extradition custody,” judge Engemayer said.
In explaining his decision, Judge Engelmayer said Kwon designed and promoted a financial system that could not survive market stress. According to the court, this structural weakness justified a harsher sentence than even the government requested.
Terra Ecosystem Implosion
Kwon pleaded guilty in August 2022 to multiple fraud charges tied to the collapse of TerraUSD (UST), an algorithmic stablecoin, and its sister token LUNA. The Terra ecosystem relied on complex mechanisms that used LUNA to keep UST pegged to the U.S. dollar.
When that peg broke in May 2022, the entire system imploded within days. The resulting crash triggered massive losses for retail and institutional investors worldwide and intensified the broader crypto market downturn that followed.
During the sentencing hearing, Kwon expressed remorse and acknowledged the financial harm suffered by investors. However, the judge noted that Kwon’s apology came more than two years after the collapse and only after reaching a plea deal.
The court also pointed to Kwon’s repeated public assurances during the crisis, when he continued to promote confidence in Terra despite growing warning signs. Those statements played a key role in how the court assessed his responsibility.
After Terra collapsed, Kwon fled South Korea and travelled across several countries. He was eventually arrested in Montenegro in March 2023 while attempting to fly to Dubai using a fake passport.
His arrest sparked a legal battle between U.S. and South Korean authorities over extradition. Montenegro ultimately approved his transfer to the United States, where he faced federal fraud charges in New York.
Related: U.S. Court Declares LUNA and UST Securities in SEC v Terraform, Do Kwon Case
Tightening legal stance toward misconduct in the crypto industry
Notably, Kwon’s sentencing follows a growing wave of enforcement actions against crypto executives. His conviction comes roughly a year after FTX founder Sam Bankman-Fried received a 25-year prison sentence for fraud. Notably, Bankman-Fried appealed the 25-year sentencing amid backlashes from the crypto community.
Likewise, Binance founder and former CEO Changpeng Zhao received a four-month prison sentence over Binance’s violation of anti-money laundering (AML) laws under the Bank Secrecy Act (BSA) in early 2024. Released in September 2024, President Donald Trump later granted him a pardon in October 2025.
Together, these cases signal a tougher regulatory and legal stance toward misconduct in the crypto industry, as authorities respond to massive investor losses and systemic failures.
