The cryptocurrency world is holding its breath as one of its most notorious figures, Do Kwon, faces the music. The co-founder of Terraform Labs is set to be sentenced today in a Manhattan federal court, concluding the US criminal case stemming from the spectacular $40 billion collapse of the TerraUSD and Luna tokens in 2022.
Once hailed as a visionary, Kwon presided over a project that spiraled into one of the largest financial calamities in digital asset history. His algorithmic stablecoin, TerraUSD, or UST, was designed to maintain a stable $1 value, an ambitious peg that relied on its sister coin, Luna. When the mechanism failed, the ensuing “death spiral” wiped out an estimated $40 billion in market value almost overnight, triggering a cascade of crises across the broader crypto landscape that some call the “crypto winter.”
The Price of ‘Colossal’ Fraud
Today’s hearing before U.S. District Judge Paul Engelmayer follows an extensive international saga. After the collapse, Kwon became an international fugitive, only to be arrested in Montenegro in March 2023 for traveling with a forged passport. He was finally extradited to the United States in December 2024.
Kwon pleaded guilty in August 2025 to two counts, including conspiracy to commit fraud and wire fraud. Now, the focus is entirely on the prison term. US prosecutors are pushing for a 12-year sentence, the maximum allowed under his plea agreement. They argue the penalty is warranted because the fraud was “colossal in scope,” its impact reaching far beyond just one project and causing a domino effect that damaged retail investors and lending venues alike.
Defense Pushes for Leniency
The defense team, on the other hand, is asking the judge for a term of no more than five years. They contend that Kwon’s conduct stemmed more from “hubris and desperation” than simple greed, and they point to the significant personal and financial price he has already paid, including time served in harsh conditions during his detention in Montenegro. Kwon himself expressed remorse in a letter to the court, accepting responsibility for the pain caused to the community.
Beyond the potential prison time, Kwon has already agreed to forfeit more than $19 million in illicit gains as part of his deal with the Department of Justice. Notably, prosecutors are not seeking restitution for victims, acknowledging the difficulty of calculating the full extent of losses among a vast and global group of investors.
What Happens Next?
While the sentencing closes the chapter on the US criminal case, it is not the end of Kwon’s legal woes. He still faces further prosecution in his native South Korea, where officials have sought his extradition and where he could face a much longer sentence, with prosecutors there reportedly seeking up to 40 years in prison for his role in the same catastrophic events.
Today’s ruling is more than just a personal sentence; it’s a defining moment for the entire digital asset space. It sends a clear message about founder accountability and the government’s strong stance against fraud in an industry that has long struggled to balance innovation with investor protection. The world is watching to see what price the former “crypto king” will ultimately pay.