Key Highlights
- U.S. prosecutors are seeking a 12-year prison sentence for Do Kwon over the $40 billion TerraUSD collapse.
- Kwon is requesting just five years, creating a major clash with prosecutors ahead of his sentencing. He is scheduled to be sentenced on December 11, 2025
- He pleaded guilty to multiple fraud charges linked to the collapse of TerraUSD and Luna.
U.S. prosecutors are asking a federal judge to sentence Terraform Labs Co-Founder Do Kwon to 12 years in prison in connection with the TerraUSD collapse in 2022, which wiped out approximately $40 billion in market value.
According to the filing submitted on December 4, prosecutors have argued that Kwon’s role in the collapse was so serious that it warrants the maximum punishment allowed under his plea deal.
Kwon is scheduled to be sentenced on December 11, 2025, by U.S. District Judge Paul Engelmayer in Manhattan. He pleaded guilty earlier this year, admitting to conspiracy involving commodities fraud, securities fraud, and wire fraud, as well as a separate wire-fraud charge.
Prosecution vs. Defense sentencing positions
While the original charges could have carried up to 25 years in prison, Kwon’s plea deal limits prosecutors to asking for a 12-year term, which they are now requesting in full.
Kwon’s legal team is arguing for a far lighter sentence. In a filing last week, his lawyers argued that five years would be sufficient punishment. They noted that he has already spent nearly three years in detention.
As part of the plea deal, Kwon has agreed to forfeit $19.3 million, including crypto-related assets. Prosecutors are not seeking restitution for victims, saying the global scale of losses makes it too difficult to calculate individual claims.
TerraUSD collapse
In May 2022, Terraform Labs’ stablecoin TerraUSD (UST) lost its dollar peg, causing a “death spiral” that also crashed the Terra network’s native token LUNA.
The Terra ecosystem’s collapse wiped out over $40 billion in market value and shook global crypto markets. Panic among UST holders fueled a surge in LUNA redemptions, flooding the market and deepening the crash.
Following the fallout, South Korean investors filed a lawsuit against Do Kwon for fraud and sought seizure of his assets. They also launched an investigation into Terraform Labs. They examined whether Co-Founder Do Kwon knew about flaws in UST’s design and if the token’s price had been manipulated.
A hard trip home in a changing crypto world
Kwon’s path to U.S. custody was long and complicated. He was arrested in Montenegro in March 2023 for using a forged passport while trying to travel to Dubai.
Both the U.S. and South Korea sought his extradition, but he was ultimately sent to the U.S. in early 2025 after nearly two years in detention. Prosecutors say they may support allowing him to serve part of his sentence in South Korea if he meets the criteria.
The case is unfolding at a time when crypto enforcement in the U.S. has become more politically divided.
In October, President Donald Trump pardoned Binance Co-Founder Changpeng Zhao, who had been convicted of failing to maintain proper anti-money laundering systems. Even so, Kwon’s prosecution remains one of the most consequential crypto-fraud cases since Terra’s collapse reshaped the industry.
