US federal prosecutors have urged a New York judge to impose a 12-year prison sentence on Terraform Labs co-founder** Do Kwon**, arguing that his years-long fraudulent conduct caused more than $40 billion in losses and eclipsed the damage inflicted by other major crypto fraud cases, including those involving Sam Bankman-Fried and Alexander Mashinsky.
What Happened
In a detailed sentencing submission filed December 4, prosecutors said Kwon “built a cryptocurrency empire… through deliberate fraud,” concealing the instability of Terraform’s products, including the algorithmic stablecoin UST, which collapsed in May 2022.
They argued that Kwon’s deception directly contributed to a cascade of failures that became known as “Crypto Winter.”
The filing states that Kwon repeatedly misrepresented the stability of the Terra blockchain, the independence of the Luna Foundation Guard reserves, and the adoption of Terraform’s products, while secretly relying on undisclosed market support to defend UST’s peg.
When the ecosystem crashed, prosecutors said, Kwon “fled from the wreckage… blamed others,” and resisted extradition.
Losses Greater Than Those In The FTX Case, Prosecutors Say
Prosecutors emphasized that the financial destruction caused by Terraform’s collapse exceeded losses from multiple high-profile crypto cases combined, including FTX’s failure under Bankman-Fried, Celsius founder Mashinsky’s fraud case, and OneCoin’s Karl Sebastian Greenwood.
Also Read: Liquidity Surge And December Fed Cut Expectations Put Bitcoin At Critical Crossroads: Analysts
Bankman-Fried, the former FTX CEO, was sentenced in March 2024 to 25 years in federal prison after being convicted on seven criminal counts including wire fraud and conspiracy.
That sentence was publicly announced by the U.S. Attorney’s Office for the Southern District of New York and widely reported by major media outlets.
Why Prosecutors Want 12 Years
The government argues that Kwon’s conduct involved a “series of considered lies,” spanned years, and left “a trail of financial destruction.”
The memo notes that Kwon targeted retail investors through podcasts and social media and falsely assured them that UST’s de-peg risk was “mathematically impossible.”
Prosecutors also highlighted Kwon’s attempts to evade responsibility after the collapse, including his travel using a false passport and minimizing of wrongdoing.
A 12-year sentence, they wrote, would reflect the seriousness of the crimes, deter similar conduct, and align with sentences in related cases. They rejected Kwon’s proposal for a five-year prison term as “utterly insufficient.”
Read Next: Schiff Plans Tokenized Gold Payments System As CZ Says Bitcoin Has Already Become Digital Money