Terraform Labs founder Do Kwon will spend 15 years in jail after pleading guilty to committing fraud.

Kwon’s company created a token called Terra USD (UST) and promoted it as a “stablecoin” that would always be valued at one US dollar.

That was easier said than done. Terraform Labs tried to make it happen with a complex scheme involving multiple protocols, a linked token called Luna, and smart contracts. In May 2022, the scheme unraveled spectacularly and the value of UST tokens fell from $1.00 to $0.09. Attempts to shore up the ecosystem by buying $3.5 billion of bitcoin didn’t work, and $40 billion of value evaporated in a puff of blockchain reverie.

Kwon is a South Korean national, Terraform Labs operated out of Singapore, and the collapse of UST burned investors across the globe. Authorities in many nations therefore wanted a word with Kwon, who in late 2022 left Singapore and disappeared.

He emerged months later in Montenegro, a tiny European country that later arrested him as he tried to reach Dubai using a fake passport.

South Korea and the USA both tried to extradite Kwon, and the latter country won out and put him on trial. After initially defending his conduct, in August Kwon pleaded guilty to conspiring to commit commodities fraud, securities fraud, and wire fraud. He also apologized.

Prosecutors sought a 12-year sentence. On Thursday, Judge Paul Engelmayer of the Southern District of New York decided 15 years was more appropriate because Kwon’s fraud was of “epic, generational scale.”

While US courts pursued Kwon, the Securities and Exchange Commission worked to wind up Terraform labs, and in 2024 secured $4.5 billion to share with creditors and authorities.

But that sum represents around ten percent of losses caused by Kwon’s actions.

The District Court published victim impact statements prior to Kwon’s sentencing and they’re tough reads because they tell stories of investors who hoped to fund their retirement, but must now continue working even as they deal with health and relationship problems caused by the collapse of UST. ®