Do Kwon Could Face Second Trial in Korea After 15-Year US Sentence

The co-founder of Terraform Labs, Do Kwon, may be looking at another trial in South Korea following his recent 15-year prison sentence in the United States. This sentence, imposed for his role in the $40 billion collapse of TerraUSD, could be compounded by additional charges back home, where prosecutors are aiming for a sentence that exceeds 30 years.

Key Takeaways

Do Kwon, Terraform Labs co-founder, received a 15-year sentence in the U.S. for committing fraud related to the TerraUSD collapse.
If eligible, Kwon could seek transfer to South Korea after serving half of his U.S. sentence.
South Korean authorities are preparing to prosecute Kwon separately for violations of capital market laws.
His actions led to significant financial losses for around 200,000 Korean investors.
Kwon’s legal issues highlight the discrepancies in sentencing for similar crimes across different jurisdictions.

Additional Trial in South Korea Looms

Terraform Labs co-founder Do Kwon faces the possibility of an additional trial and a lengthy prison sentence in South Korea after receiving a 15-year sentence in a Manhattan federal court for his involvement in the collapse of TerraUSD, which cost investors about $40 billion.

As reported by The Korea Times, the 34-year-old could apply for transfer to South Korea after serving half of his sentence in the U.S. There, prosecutors aim to impose a sentence of over 30 years for breaching capital markets laws.

US District Judge Paul Engelmayer pronounced the sentence last week, dismissing the prosecution's 12-year recommendation and the defense's plea for only five years. Judge Engelmayer remarked, “In the history of federal prosecutions, there are few frauds that have caused as much harm as you have,” addressing Kwon directly.

Do Kwon Korea Sentence - Do Kwon Arrest Picture

South Korean Authorities Prepare for Separate Prosecution

South Korean prosecutors secured an arrest warrant for Do Kwon in September 2022 through a joint financial crimes unit from the Seoul Southern District Prosecutors’ Office. According to a senior prosecutor, pursuing charges domestically would better serve approximately 200,000 local victims who collectively lost around 300 billion won ($204 million).

Ten individuals alleged to be accomplices of Kwon have faced trial in South Korea for nearly three years while they awaited Kwon’s potential return. The forthcoming charges in Korea are related to his same conduct that led to his conviction in the U.S., specifically violations of the Capital Markets Act.

Korean prosecutors assert that they can pursue punishment for Kwon independently, irrespective of the proceedings in the U.S. Kwon initially sought to be extradited to Korea instead of the U.S. following his arrest in Montenegro in March 2023 for allegedly possessing forged documents. After spending nearly two years in detention, he was transferred to the U.S. in December 2024, with his defense team describing the conditions in Montenegro as "brutal."

Understanding the Mechanics of the Terra Collapse and Fraud Claims

From 2018 to 2022, Kwon actively engaged in schemes aimed at defrauding cryptocurrency purchasers associated with Terraform Labs. The Singapore-based company was responsible for issuing the TerraUSD stablecoin alongside its sibling token, Luna, falsely claiming that the protocol ensured a one-to-one dollar peg.

After Terra fell below $1 in May 2021, Kwon publicly assured investors that the protocol had autonomously corrected its value. Subsequent investigations by U.S. prosecutors revealed that an investment firm hired by Terraform Labs had secretly purchased Terra tokens to artificially boost their price, thus obscuring Jump Trading’s involvement from investors.

Both Terra and Luna experienced further plummets in May 2022, leading to losses of tens of billions for investors and causing failures across broader cryptocurrency markets. Federal prosecutors pointed to this collapse as contributing to the downfall of Sam Bankman-Fried's FTX as evidence of extensive systemic damage exceeding the immediate losses tied to Terra.

Kwon faced convictions for nine counts, including fraud and money laundering. Judge Engelmayer also mandated the forfeiture of $19 million in illicit gains. While the initial potential sentence under U.S. guidelines could have reached 130 years, a plea agreement reduced the prosecutorial recommendations to a maximum of 12 years.

Disparities in Sentencing and Transfer Considerations

Judge Engelmayer labeled the 12-year recommendation as “unreasonable,” noting that the five-year request was “implausible,” ultimately deciding on a 15-year sentence as “the least I can impose.” The defense argued that Kwon's dual prosecution should be a consideration during sentencing due to overlapping allegations.

The court rejected this notion, stating that individual court decisions should not speculate on other courts' judgments. U.S. prosecutors indicated they would not object to a transfer request under the International Prisoner Transfer Program after Kwon serves half of his sentence, preserving the route for prosecution in Korea.

The stark difference in treatment compared to Bankman-Fried's 25-year sentence raises questions about consistency, particularly since Kwon's guilty plea significantly mitigated his exposure despite Terra's greater losses. Legal experts comment that federal guidelines for fraud at this magnitude generally suggest sentence lengths approaching life imprisonment before any statutory caps.

While Kwon will receive credit for time served in U.S. custody, it remains unclear whether his 21-month detention in Montenegro will count towards his American term. This sentencing occurs amid a rising wave of crypto-related criminal activity globally, with authorities in Spain and Denmark recently arresting nine suspects involved in a violent kidnapping tied to crypto holdings. Furthermore, authorities in South Australia lodged 800 charges against 55 individuals connected to a large crypto-linked crime ring just last month.