South Korean cryptocurrency entrepreneur and wanted fraudster Do Kwon was sentenced on Thursday by a US federal judge from the Southern District of Recent York to 15 years in prison.
Kwon cut a sedate figure as he was escorted into the courtroom by U.S. marshals, his head bowed and his cheeks sunken as if he had lost significant weight. He wore a airy lemon prison jumpsuit and a long-sleeved shirt with cuffs around his waist and hands.
In August Kwon he pleaded guilty to defraud investors who bought cryptocurrencies issued by his company Terraform Labs. In May 2022 sudden fall of these coins wiped out $40 billion and sent the crypto economy into a tailspin that bankrupted many other companies.
“Kwon’s fraud was colossal in scope and permeated virtually every aspect of Terraform’s alleged operations,” U.S. prosecutors said in a statement. the latest court document. “His rampant lies have left a trail of financial destruction in their wake.”
Given the opportunity to address the court on Thursday, Kwon said he took sole responsibility for the fraud. After thanking his former colleagues and supporters, some of whom had gathered in the public gallery, he became emotional. Lawyers to his left and right were stroking his back.
The crimes to which Kwon pleaded guilty carry a sentence of up to 25 years in prison. Before the trial, prosecutors asked for a 12-year prison sentence. However, Presiding Judge Paul Engelmayer ruled that a more punitive sentence was required to deter future cryptocurrency fraudsters.
“This case will be a reminder of the law being broken and what will happen,” Engelmayer said in the courtroom. “Until next time, Do Kwon, if you commit fraud, you will lose your freedom for a long time.”
As he was put into an elevator outside the courtroom after receiving his sentence, Kwon appeared to be holding back tears. The chain that hung between his feet rattled on the floor.
Not a very stable coin
Kwon founded Terraform in 2018 with co-founder Daniel Shin. Two years later, the company announced plans to launch TerraUSD (UST), a stablecoin whose value was allegedly pegged to the US dollar via an algorithm. The algorithm would effectively link UST to the second coin issued by LUNA. Dollar LUNA can be exchanged for dollar UST and vice versa. If UST ever falls below $1, investors will be encouraged to purchase LUNA until the target value is restored.
“It was an intriguing and very novel mechanism,” Noelle Acheson, an analyst who previously worked at cryptocurrency broker Genesis, told WIRED last year. “A lot of smart people believed it would work.”
In May 2022, the price balancing system belched. When traders sold large quantities of USTthe dollar fell, which led to panic and selling brought the price virtually to zero. In now-infamous tweetKwon tried to stop the sell-off, writing, “by deploying more capital – stable boys.” However, the value of UST and LUNA plummeted, wiping $40 billion from the market.