Terraform Labs co-founder Do Kwon was sentenced to 15 years in prison in the US for fraud that led to the collapse of the Terra ecosystem, wiped out the savings of hundreds of thousands of investors, and became one of the key triggers of the global «cryptowinter» of 2022.
Terraform Labs co-founder Do Kwon was sentenced to 15 years in prison in the US for fraud that led to the collapse of the Terra ecosystem, wiped out the savings of hundreds of thousands of investors, and became one of the key triggers of the global «cryptowinter» of 2022.
According to Bloomberg, the sentence was handed down by federal judge Paul Engelmayer in New York. During the hearing, he called Kwon’s actions «a fraud of epic, generational proportions» and imposed a harsher sentence than prosecutors had requested. The prosecution had insisted on 12 years, but the court concluded that given the scale of the harm, that would be too lenient.
The court found that Kwon misled investors about the stability of the algorithmic stablecoin TerraUSD and the actual functioning of the Terraform ecosystem. In May 2022, the loss of TerraUSD’s peg to the dollar set off a chain reaction in the crypto market that wiped out tens of billions of dollars in assets and undermined confidence in the entire sector. Prosecutors indicated that this crisis was one of the factors in the subsequent collapse of Sam Benkman-Fried’s FTX.
The courtroom was filled with victims and supporters of Kwon. The judge said he had received letters from 315 victims from around the world. People wrote about losing their homes, retirement savings, medical bills and children’s educations. According to Engelmeier, Kwon’s influence was so strong that even after he pleaded guilty, some investors continued to believe in him so strongly, «as if they were members of his cult.»
Kwon himself pleaded guilty in August and publicly apologized to the victims, saying he was responsible for the damage. The court credited him with 17 months in prison in Montenegro, where he was detained with a fake passport while hiding. At the same time, after serving his sentence in the United States, Kwon could face a new trial in South Korea.
Terraform Labs was founded in 2017, and TerraUSD was advertised as a «stable» uncollateralized stablecoin. Its collapse was one of the most high-profile failures in crypto history and an example of the risks of algorithmic financial models that have long been largely unregulated.
Previously, dev.ua wrote about how Ukrainian law enforcement officers are investigating a large-scale cryptocurrency scam. A fraudster from Zhytomyr stole millions of hryvnias by hacking the wallets of his friends who trusted him.
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