Crypto mogul Do Kwon sentenced to 15-years for $40B fraud
What's the story
Do Kwon, a former cryptocurrency mogul and Stanford graduate, has been sentenced to 15 years in prison for his role in a $40 billion fraud scheme. The collapse of his crypto ecosystem left victims devastated as they were misled into believing that their investments were secure. Kwon apologized after hearing the impact of the scam on victims' lives, including one who contemplated suicide after losing his father's retirement money in the scheme.
Sentencing details
Judge criticizes lenient sentencing recommendations
During the sentencing hearing in Manhattan federal court, Judge Paul A. Engelmayer rejected both the government's recommendation of 12 years and the defense's request for five years as "unreasonably lenient" and "utterly unthinkable and wildly unreasonable." Kwon faced a maximum sentence of 25 years in prison for his actions. The judge emphasized that Kwon's offense caused real people to lose $40 billion in real money, not just a paper loss.
Fraud scale
Kwon's fraudulent activities and their impact
Kwon pleaded guilty in August to fraud charges related to the collapse of Terraform Labs, the Singapore-based company he co-founded in 2018. The losses from this fraud were greater than those caused by FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood. Judge Engelmayer estimated that there may have been as many as a million victims of Kwon's fraudulent activities.
Market impact
Terraform Labs's TerraUSD and Luna crash
Terraform Labs marketed its TerraUSD as a stablecoin, but prosecutors say it was an illusion supported by outside cash infusions. The collapse of this stablecoin and its floating sister currency, Luna, triggered a series of crises in the cryptocurrency markets. Kwon attempted to revive Terraform Labs in Singapore before fleeing to the Balkans on a false passport. He has been in custody since his March 2023 arrest in Montenegro.
Plea agreement
Kwon's plea deal and sentence location
As part of his plea deal, Kwon agreed to forfeit over $19 million. His lawyers argued that his actions were not driven by greed but rather hubris and desperation. However, Judge Engelmayer denied his request to serve his sentence in South Korea, where he also faces prosecution and where his family resides.
Testimony impact
Victims' testimonies reveal devastating impact of Kwon's fraud
Victims of Kwon's fraud testified about the devastating impact it had on their lives. One victim said he lost his wife, sons had to skip college, and he had to move back to Croatia after TerraUSD's crash wiped out his family's life savings. Another victim revealed that they have to "live with the guilt" of convincing their in-laws and hundreds of nonprofit organizations to invest in Kwon's scheme.