The collapse of his cryptocurrency resulted in tens of billions of dollars in losses. He is asking for 5 years in prison

The prosecutor's office agreed not to demand a sentence longer than 12 years in prison. The guilty man asks the American court to limit his sentence to five years. Do Kwon, the creator of the Terra LUNA cryptocurrency, the collapse of which caused investors over $40 billion in losses, is scheduled to be sentenced on December 11. After serving his sentence in the US, he faces 40 years in prison in his own country.

The co-founder of Terraform Labs, Do Kwon, believes that the American court should sentence him to no more than five years in prison – this information was obtained by the Bloomberg agency, whose journalists got acquainted with the court files of the case. The request of the one-time cryptocurrency multimillionaire comes shortly before the verdict, which is to be handed down on December 11 in a court in Manhattan.

In August this year, Do Kwon pleaded guilty to charges of conspiracy to defraud and telecommunications fraud in connection with the collapse of the stablecoin TerraUSD and cryptocurrency Terra Luna, avoiding trial after being extradited to the United States. As part of the settlement, he agreed to give back over $19 million and several properties.

The US prosecutor's office agreed to a maximum sentence of 12 years in prison. Do Kwon's lawyers argued in court documents that such a sentence would be “far above what justice requires.” They emphasized that the creator of Terraform Labs had already spent almost three years behind bars, including more than half of that time in “brutal conditions” of detention in Montenegro.

The collapse that shook the cryptocurrency market

On May 12, 2022, the Terra LUNA cryptocurrency officially collapsed, which was then one of the top ten digital assets in terms of market capitalization. Overnight, its value dropped to zero, causing losses estimated at over $40 billion. As it turned out later, this project was constructed incorrectly and a “minor” speculative attack was enough to destroy it.

The main problem and weakness of Do Kwon's cryptocurrency venture lay in the algorithmic stablecoin UST (TerraUSD). The algorithmic nature of it meant that it was not backed by dollars in the way that USDT or USDC was, but by a decentralized mechanism in which users kept it stable by receiving 20% ​​interest.

As it turned out, this mechanism was faulty. A sufficiently large sale of UST tokens was enough for the exchange rate to break away from parity with the dollar and then collapse, taking Terra with it, which caused panic and a massive sale, and ultimately the collapse of the entire project. The losses affected a wide range of investors, from individual investors to VC funds, institutions and start-ups that built many of their own tokens and decentralized projects based on Luna.

Flight to Montenegro and extradition

After the fall of Terra, its founder Do Kwon fled his native South Korea and went into hiding until March 2023. He was detained in Montenegro when he tried to board a plane to Dubai using a false passport. Tak Do Kwon was arrested for using forged documents, and the United States and South Korea began fighting for his extradition.

Ultimately, Do Kwon ended up in the USA. However, in South Korea, he is still awaited by investigators and a trial in which he may be sentenced to another 40 years in prison. Interestingly, Montenegrin media revealed last year that Milojko Spajić – the country's current prime minister – was one of the first people to support Terraform Labs. In 2018, the politician invested $75,000 in the cryptocurrency, for which he was to receive 750,000 Terra Luna tokens. At their peak, in April 2022, they would be worth more than $89 million.

MM

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