A U.S. federal court has sentenced Do Hyeong Kwon, the co-founder of Terraform Labs, to 15 years in prison for orchestrating one of the largest cryptocurrency frauds in history that erased roughly $40 billion in investor value.
📉 Collapse of TerraUSD and Luna
Kwon, a 34-year-old South Korean entrepreneur, helped create the TerraUSD (UST) stablecoin and its sister token Luna, once touted as revolutionary digital assets that would maintain price stability using an algorithmic mechanism. Instead, both tokens plunged in May 2022, triggering a dramatic market crash that wiped out tens of billions of dollars from the crypto ecosystem.
Prosecutors charged that Kwon misled investors by falsely claiming algorithms ensured TerraUSD’s value would hold, when in reality market support relied on secret financial manoeuvres that artificially bolstered prices before the collapse.
⚖️ Guilty Plea and Sentence
Kwon pleaded guilty in August 2025 to wire fraud and conspiracy to defraud investors in Manhattan federal court. On December 11, 2025 — nearly three years after the collapse — U.S. District Judge Paul A. Engelmayer handed down a 15-year prison sentence, noting the “epic, generational” scale of the fraud and its profound impact on victims worldwide
The sentence exceeded prosecutors’ recommendation of 12 years and far surpassed the defence’s request for a lighter term
💔 Impact on Investors
The Terra ecosystem’s demise didn’t just wipe out market value; it left thousands of individual and institutional investors with severe financial losses. In court, victims described losing life savings, retirement funds, and livelihoods — with some recounting emotional and personal devastation following the collapse.
Judge Engelmayer emphasised that Kwon’s actions caused real financial harm, not merely abstract losses, calling the scheme a fraud that transcended typical financial misconduct.
🌍 International Case and Extradition
Kwon’s legal troubles began long before his sentencing. After the Terra collapse, he fled Singapore and was eventually arrested in Montenegro in 2023 while travelling with a fake passport. Following protracted legal proceedings, he was extradited to the United States to face criminal charges
In addition to his prison term, Kwon agreed to forfeit more than $19 million tied to the fraud scheme and was previously barred from cryptocurrency trading and assets under U.S. Securities and Exchange Commission agreements.
📊 Broader Regulatory Message
Kwon now joins a growing list of high-profile crypto figures prosecuted for fraud — underlining intensifying scrutiny from regulators and law enforcement on digital asset markets. His case has been compared with other major financial frauds and is regarded as a cautionary milestone in global crypto enforcement efforts.
