Prosecutors Recommend 12-Year Sentence for Do Kwon in Terra Fraud

U.S. prosecutors have recommended a 12-year prison sentence for Do Kwon, the co-founder of Terraform Labs, for his role in a multibillion-dollar fraud that led to the 2022 collapse of the TerraUSD stablecoin and its associated LUNA token. The recommendation, outlined in a court filing submitted to the Southern District of New York, highlights the scheme's vast scope and its devastating impact on investors worldwide. Kwon's sentencing is set for December 11, 2025, before U.S. District Judge Paul A. Engelmayer in Manhattan federal court.

The case centers on Kwon's promotion of TerraUSD, or UST, as a reliable algorithmic stablecoin designed to maintain a 1-to-1 peg with the U.S. dollar through decentralized mechanisms and market incentives, without needing centralized backing. Prosecutors contend that Kwon and his team made false statements about the product's stability and resilience, misleading investors into believing it operated autonomously. In reality, court documents allege, the system relied on undisclosed interventions. For instance, when UST briefly lost its peg in May 2021, Kwon arranged a secret agreement with a high-frequency trading firm to purchase large volumes of...