Do Kwon, co-founder of Terraform Labs, is requesting that a U.S. court limit his prison term to five years for his involvement in the 2022 collapse of the TerraUSD (UST) stablecoin, which wiped out approximately $40 billion in investor funds.
Kwon’s appeal comes ahead of his December 11 sentencing in Manhattan, where a federal judge will determine his prison term following his guilty plea to conspiracy and wire fraud, Bloomberg reports.
Defense Cites Time Served and Harsh Conditions
Kwon avoided a trial after being extradited from Montenegro, where he had been arrested and convicted for using a fake passport while evading charges in South Korea.
In court filings, his lawyers argued that the maximum 12-year sentence agreed upon in his plea deal is “far greater than necessary” to achieve justice. They emphasized that Kwon has already spent nearly three years in custody, including over half of that in harsh conditions in Montenegro.
As part of his plea agreement, Kwon has agreed to forfeit more than $19 million and several properties. His legal team also noted that he still faces potential prosecution in South Korea, where authorities are reportedly seeking a 40-year prison term for the same actions.
Background on the TerraUSD Collapse
In August, Kwon appeared in a Manhattan federal courtroom and pleaded guilty to conspiracy to defraud and wire fraud in connection with the collapse of TerraUSD (UST) and Luna.
The failure of these cryptocurrencies during the 2022 market downturn destroyed roughly $40 billion in investor assets. Kwon admitted to misleading investors about how TerraUSD maintained its $1 peg, stating:
“I made false and misleading statements about why it regained its peg by failing to disclose a trading firm's role in restoring that peg. What I did was wrong.”
Next Steps
U.S. District Judge Paul Engelmayer is scheduled to issue Kwon’s sentence on December 11. The government is expected to submit its own sentencing recommendation, which could influence whether Kwon’s requested five-year term is approved.
The case remains closely watched, as it underscores the regulatory and legal challenges surrounding stablecoins and crypto market accountability.