Onetime cryptocurrency magnate Do Kwon was sentenced Thursday to 15 years in prison after a $40 billion collapse revealed his crypto ecosystem to be a sham. Sufferers claimed the 34-year-old financial technology wizard manipulated their confidence to assure them that the investment — secretly sustained by cash injections — was secure.
Kwon, a Stanford alumnus known by some as “the cryptocurrency monarch,” expressed remorse after listening as victims — one in court and others by phone — detailed the scam’s impact: erasing savings, draining charities, and ruining lives. One informed the judge in a letter that he considered self-destruction after his parent lost his retirement funds in the operation.
Judge Paul A. Engelmayer stated at a daylong sentencing hearing in Manhattan federal court that the administration’s proposal of 12 years in prison was “inappropriately lenient” and that the counsel’s appeal for five years was “completely inconceivable and wildly unreasonable.” Kwon faced a maximal sentence of 25 years confinement.
“Your wrongdoing resulted in actual persons losing $40 billion in actual currency, not some paper diminution,” Engelmayer informed Kwon, who was seated at the defense station in a yellow detention suit. The judge labeled it “a deception on an immense, epochal level” and asserted Kwon possessed an “almost supernatural grip” on investors and brought about unquantifiable “human devastation.”
More than the combined losses in FTX and OneCoin matters
Kwon admitted guilt in August to deceit charges arising from the failure of Terraform Labs, the Singapore-based enterprise he co-established in 2018. The loss surpassed the combined losses from FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood’s deceptions, investigators maintained. Engelmayer approximated there might have been a million injured parties.
Terraform Labs had promoted its TerraUSD as a dependable “stablecoin” — a type of medium of exchange normally tethered to steady holdings to avert drastic shifts in valuations. But prosecutors contend it was a pretense supported by external cash injections that imploded after it plunged far beneath its $1 anchor. The failure decimated backers in TerraUSD and its variable sibling currency, Luna, inciting “a chain reaction of turmoil that swept through cryptocurrency exchanges.”
Kwon attempted to revive Terraform Labs in Singapore prior to escaping to the Balkans using a false passport, investigators noted. He’s been confined since his March 2023 apprehension in Montenegro. He was credited for 17 months he spent incarcerated there before being sent to the U.S.
Kwon consented to surrender over $19 million as part of his plea accord. His legal representatives argued his behavior sprang not from avarice, but overconfidence and despair. Engelmayer denied his plea to undergo his sentence in his native South Korea, where he also confronts legal action and where his spouse and 4-year-old daughter reside.
“I have devoted nearly every conscious moment of the past few years contemplating what I might have done otherwise and what I can achieve now to rectify matters,” Kwon told Engelmayer. Learning of the injured parties, he remarked, was “distressing and reminded me again of the substantial deficits I have generated.”
Sufferers say losses destroyed their lives, hurt charities
One injured party, addressing by phone, stated his wife divorced him, his sons needed to forgo university, and he had to relocate back to Croatia to reside with his progenitors after TerraUSD’s breakdown wiped out his household’s financial security. Another mentioned he has to “live with the remorse” of advising his in-laws and hundreds of charitable foundations to invest.
Stanislav Trofimchuk reported his household’s investment dropped from $190,000 to $13,000 — “17 years of our existence, vanished” during what he characterized as “two weeks of pure dread.”
Chauncey St. John, speaking in court, said some nonprofits he assisted lost over $2 million and a religious group lost approximately $900,000. He and his wife are burdened with obligations and his in-laws have been compelled to work well past their planned retirement, he said.
Nevertheless, St. John asserted, he pardons Kwon and “I beseech the Lord to show compassion on his spirit.”
A prosecutor read excerpts from some of the over 300 letters submitted by injured parties, including an individual recognized solely by initials who lost nearly $11,400 while managing expenses and attempting to complete higher education. Kwon had made Terra appear like a secure repository for savings, the individual remarked.
“To some that is merely a figure on a sheet, but to me it represented years of effort,” the person penned. “Observing it disappear, truly overnight, was one of the most frightening ordeals of my existence.”
“What occurred was not an accident. It was not a market occurrence. It was misrepresentation,” the person added, urging the judge to “weigh the individual toll of this catastrophe.”
Kwon fabricated an “image of fortitude while concealing systemic malfunction,” Assistant US Attorney Sarah Mortazavi told Engelmayer. “This was deceit executed with presumption, maneuvering, and complete indifference toward people.”
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