Do Kwon Sentenced to 15 Years Over Terra Collapse

On 11 December 2025, Do Kwon, the co-founder of Terraform Labs, was sentenced by a U.S. federal court in New York to 15 years in prison for orchestrating one of the most damaging frauds in cryptocurrency history.

The sentence stems from the collapse of the TerraUSD (UST) algorithmic stablecoin and its sister token LUNA in May 2022, a failure that erased approximately $40 billion in investor capital and sent shockwaves through the digital asset sector.

Kwon pleaded guilty in August 2025 to charges of wire fraud, securities fraud, and conspiracy to defraud investors. U.S. prosecutors had recommended a 12-year term, but Judge Lewis Kaplan handed down a longer sentence, citing the unprecedented scope of financial harm. Kwon will receive credit for time served during pre-extradition detention in Montenegro, where he was arrested in March 2023 while attempting to travel on a forged Costa Rican passport.

Terraform Labs’ core promise was that its UST stablecoin could maintain a 1:1 peg with the U.S. dollar through algorithmic incentives involving the creation and destruction of LUNA. That model unravelled rapidly in early May 2022, as market confidence collapsed and the mechanism failed to hold the peg. The resulting implosion triggered defaults, liquidations, and insolvencies across crypto lending platforms and funds tied to the Terra ecosystem.

Kwon’s sentencing follows the March 2025 conviction of FTX founder Sam Bankman-Fried, who received a 25-year prison term for fraud and conspiracy related to the collapse of his exchange. Together, these cases signal a heightened era of legal accountability within the crypto industry.

For Bitcoin, the implications are clear. The Terra collapse epitomised the risks of centralised, unproven financial engineering, in contrast to Bitcoin’s transparent, decentralised architecture. As regulators continue to pursue accountability in the wake of industry-wide failures, Bitcoin remains distinguished by its resilience, predictability, and absence of a single point of control.