Do Kwon requests 5-year prison term cap in $40 billion Terra fraud case

Terraform Labs founder Do Kwon has requested a U.S. court to cap his prison sentence at five years following his guilty plea in a fraud case tied to the $40 billion collapse of the Terra-Luna cryptocurrencies.

In a 23-page letter filed on Nov. 26 in the U.S. District Court for the Southern District of New York, lawyers for Kwon argued that a prison term of up to five years would be sufficient.

“While the government’s offer to seek no more than a 12-year sentence accounts for these factors, it does not consider the totality of circumstances that support a sentence not greater than five years’ incarceration,” the letter said.

In August, Kwon pleaded guilty to two counts related to fraud charges stemming from the May 2022 collapse of Terraform Labs’ Terra ecosystem, including algorithmic stablecoin TerraUSD and sister cryptocurrency Luna.

The document attributes the crash partly to coordinated trades by third-party firms exploiting vulnerabilities, citing academic papers and reports from Chainalysis. It also notes Kwon’s failure to disclose a secret agreement with Jump Trading to support UST’s peg in May 2021, which he now regrets as misleading investors about the project’s risks.

“Do’s criminal conduct was not motivated by personal greed or enrichment, but rather flowed initially from his ‘hubris’ and later from the desperation of a young founder who made serious mistakes while facing pressures he was ill-equipped to handle,” Kwon’s attorneys said.

The filing also highlighted Kwon’s nearly two-year detention in Montenegro, including solitary confinement, following his March 2023 arrest for using a fake passport and leading up to his extradition to the U.S. in December 2024. It added that Kwon still faces charges in South Korea, where prosecutors are seeking 40 years in prison for the same indictment.

“Do has already suffered enormously from his conduct,” the letter said. “Regardless of the sentence … more lies ahead.”

The sentencing for Kwon is scheduled to take place on Dec. 11.