Do Hyeong Kwon, the co-founder of Terraform Labs PTE, Ltd., was sentenced to 15 years in prison for wire fraud and conspiracy to commit securities fraud, commodities fraud, and wire fraud. The sentence was handed down by U.S. District Judge Paul A. Engelmayer after Kwon pleaded guilty in August 2025. Kwon had been extradited on December 31, 2024.
U.S. Attorney Jay Clayton stated: “Do Kwon devised elaborate schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit. When his crimes caught up to him, Kwon embarked on a deceptive public relations campaign to cover up his fraud, laundered the proceeds of his illegal schemes, and sought to purchase political protection in foreign countries to evade criminal prosecution. Let there be no mistake, fraud is fraud whether it takes place on our streets, in our securities markets, or in our emerging and important digital asset ecosystem, and no matter where in the world criminals may seek refuge, the women and men of the Southern District of New York will relentlessly pursue justice for investors and protect the integrity of financial markets.”
According to court documents and statements made during proceedings, Kwon led a scheme from at least 2018 through 2022 to defraud purchasers of cryptocurrencies issued by Terraform Labs. Terraform distinguished itself with algorithmic stablecoins under what it called the “Terra Protocol.” In September 2020, Terraform launched TerraUSD (UST), a stablecoin pegged to the U.S. dollar that could be exchanged for $1 worth of LUNA tokens.
Kwon promoted Terraform as a decentralized finance platform with products governed by users rather than company insiders. However, prosecutors said core products did not function as advertised; instead they were manipulated to create an illusion of decentralization and stability.
The indictment detailed several misrepresentations:
– Kwon falsely claimed that an algorithm alone maintained UST’s $1 peg even after its value dropped below $0.92 in May 2021; in reality he arranged for a trading firm to buy large amounts of UST to restore its value.
– He misrepresented the independence of Luna Foundation Guard Ltd., which he controlled alongside Terraform.
– Kwon claimed that Mirror Protocol operated independently when he actually controlled it using trading bots funded by pre-mined stablecoins.
– He stated that Chai—a Korean payment app—used Terra blockchain technology when transactions were processed through traditional networks.
– He provided misleading disclosures about approximately one billion Genesis Stablecoins created at Terra’s launch; these coins were used for market manipulation.
At its peak in spring 2022, combined market values for UST and LUNA exceeded $50 billion as both institutional and retail investors joined based on claims made by Kwon and associates about product reliability.
By May 2022, increased market size prevented further concealment of system weaknesses when UST lost its peg again. Both UST and LUNA collapsed shortly thereafter causing investor losses exceeding $40 billion.
Following these events—and subsequent investigations—Kwon attempted to avoid accountability while publicly claiming cooperation with authorities. In a recorded conversation from August 2022 he discussed strategies for evading law enforcement including seeking political protection abroad.
On March 23, 2023 Kwon was arrested in Montenegro attempting to use fraudulent travel documents.
In addition to imprisonment Kwon must forfeit over $19 million derived from his offenses including interests related to Terraform Labs’ assets.
U.S. Attorney Clayton acknowledged assistance from multiple FBI divisions—including Virtual Assets Unit—and thanked international partners such as Montenegro’s Ministry of Justice and Korea’s Ministry of Justice as well as the Securities Exchange Commission which pursued separate civil action against Kwon.
The case was prosecuted by Assistant U.S. Attorneys Marguerite B. Colson, Sarah Mortazavi, and Kimberly Ravener under the Office’s Securities and Commodities Fraud Task Force.
