A Manhattan federal judge on Friday sentenced Terraform Labs founder Do Kwon to 15 years in prison for his role in the 2022 collapse of the Terra ecosystem.
The ruling follows Kwon’s guilty plea and a courtroom hearing that laid bare the human and financial fallout from the crash.
Markets reacted sharply, with both Terra 2.0’s LUNA and Terra Luna Classic (LUNC) tumbling on the news.
Victims of the collapsed Terra ecosystem recount upended lives
The fall of Terra in May 2022 began when UST lost its dollar peg, triggering a cascade that erased roughly $40 billion in market value within days.
That crisis reshaped sentiment across the crypto industry and remains one of the sector’s most consequential failures.
During the sentencing hearing, multiple victims delivered powerful, emotional testimony about the personal toll of the collapse.
One investor said a $190,000 life savings vanished after he followed public assurances that the system was safe and yielding high returns. He described losing his marriage and his savings, and now works long hours as a mechanic in Europe.
Another witness, who said she sold an apartment in Moscow and moved to Tbilisi, told the court her $81,000 investment had dwindled to $13. She testified that she is homeless and without a pension or family support, and pleaded for a resolution.
Victims from Ukraine, Croatia, North Macedonia and elsewhere recounted similar stories of financial ruin, health problems, and shattered plans.
Do Kwon’s flight, arrest and extradition
After the collapse, Kwon fled South Korea and moved between countries as authorities pursued him.
Montenegrin officials arrested him in March 2023 while he was allegedly attempting to travel with a false passport. That arrest set off legal battles over extradition, with both the United States and South Korea seeking custody.
Montenegro ultimately extradited Kwon to New York, where federal fraud charges were filed and Do Kwon pleaded guilty.
Judge imposes stiffer punishment than recommended
Despite Do Kwon pleading guilty, US District Judge Paul Engelmayer has handed down a sentence that exceeded both the prosecution’s and the defense’s recommendations.
Federal prosecutors had sought a 12-year term, arguing Kwon’s conduct devastated investors around the world.
Defense lawyers had urged a sentence as light as five years, citing cooperation and remorse. Engelmayer rejected both requests, saying the harm and instability caused by Kwon’s leadership warranted a longer prison term.
Kwon previously pleaded guilty in August to fraud charges tied to the algorithmic stablecoin UST and its companion token, LUNA. In court, he expressed remorse and acknowledged the damage inflicted on investors, but the apology came more than two years after the collapse and only after reaching a plea agreement.
Markets plunge after sentencing
The sentencing has negatively affected Terra Luna Classic (LUNC) and Terra (LUNA), the two cryptocurrencies linked to Terraform Labs.
Terra Luna Classic (LUNC) dropped sharply, trading near $0.00004623 and falling roughly 22.5% in a 24-hour window.
Terra 2.0’s LUNA also slid, trading near $0.1831 and down about 13.5% over the same period.
Notably, the market plunge comes just days after the two altcoins recorded astounding gains in anticipation of the ruling.