The legal saga surrounding Do Kwon, co-founder of Terraform Labs, is reaching a critical juncture. As the December 11 sentencing date approaches, Kwon’s legal team has recommended a five-year prison term for his involvement in the catastrophic $40 billion collapse of the TerraUSD (UST) stablecoin in 2022.
Kwon’s lawyers argue that he has already “suffered substantially” during nearly three years of incarceration, much of which was spent in what they described as harsh conditions while detained in Montenegro. The defense insists that a five-year sentence would be adequate given the circumstances, referencing the prosecutor’s expected recommendation of a twelve-year sentence as excessively harsh.
As part of Kwon’s plea deal struck in August, he agreed to forfeit more than $19 million and certain properties, acknowledging his misdeeds in the process. He conceded guilt on two charges out of a total of nine initially filed against him by U.S. authorities, which included serious accusations of securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering.
Previously, Kwon had pled not guilty to all charges, but later reversed his stance, admitting during this plea that he made false and misleading statements regarding the recovery of TerraUSD’s peg in 2021. He explained that he had failed to disclose the involvement of a trading firm in restoring that peg, asserting, “What I did was wrong.”
As the trial progresses, prosecutors are anticipated to submit their recommendation for sentencing soon. However, their agreement under the plea deal limits their recommendation to a maximum of twelve years in prison, which contrasts sharply with the five years proposed by Kwon’s defense.
A significant aspect of Kwon’s legal predicament is the ongoing case he faces in South Korea. His lawyers emphasize that he is also awaiting trial in his home country and that South Korean prosecutors are pursuing a prison term that could exceed 40 years for similar charges.
This legal turmoil unfolded after the collapse of Terraform Labs, which prompted authorities from both South Korea and the United States to seek accountability from Kwon. Following a lengthy period on the run, Kwon was apprehended by Montenegrin authorities in March 2023 for attempting to travel with forged identification documents.
Initially held in Montenegro under a four-month sentence, Kwon found himself entangled in a complex extradition battle involving both South Korea and the U.S. He was eventually extradited to the U.S. on December 31, 2024, after Montenegrin authorities consented to the American request.
With the sentencing looming, many in the crypto community are closely monitoring Kwon’s fate, as it not only represents a pivotal moment for the individuals affected by the Terra collapse but also raises broader questions about accountability and regulation in the volatile cryptocurrency realm.
