Do Kwon: The $40 Billion Vaporizer

On 11 December 2025, in a Manhattan courtroom, Judge Paul Engelmayer looked at the man who had built Terra and called what he had done a fraud on an "epic, generational scale". Prosecutors had asked for 12 years. Do Kwon's lawyers had asked for five. Engelmayer gave him 15, and said that without the guilty plea it would have been more.

It was the end of a chase that began three and a half years earlier, when Terra's two coins, the TerraUSD stablecoin and its sister token LUNA, lost about $40 billion of value in a week in May 2022. Hundreds of victims wrote to the court before sentencing. One man from Ukraine told the judge he had lost nearly $200,000. Kwon apologised to them in court.

The story of Kwon himself, and of how Terra rose and fell, is told in the Villains section. This is the record of the case.

What he was accused of

UST was meant to be a digital dollar: one token, always worth one US dollar. Most stablecoins keep that price by holding real dollars in a bank. UST had no such reserve. It relied on a formula that let anyone swap one UST for a dollar's worth of newly printed LUNA, which only worked while people believed LUNA was worth something. When the belief went, so did both coins.

A failed experiment is not a crime. Prosecutors said the crime was in what Kwon told investors about it. The central lie went back to May 2021, a year before the crash, when UST slipped below a dollar and then recovered. Kwon told the public the formula had fixed it. According to prosecutors and the Securities and Exchange Commission (SEC), the US stock market regulator, he had in fact secretly arranged for a trading firm to buy large amounts of UST and push the price back up, in return for cheap LUNA. Investors who believed the formula worked put billions more in.

Prosecutors also said he lied about Chai, a Korean payments app that Terraform Labs claimed was processing real customer payments on the Terra blockchain. It was not, they said. The SEC's case also covered Mirror Protocol, a Terra service that let people trade synthetic copies of US shares. Behind it all stood the Luna Foundation Guard, a fund Kwon controlled that spent about $3 billion on bitcoin to defend UST and lost it in days.

On the run

Kwon had moved from Seoul to Singapore before the crash. On 14 September 2022 a Seoul court issued an arrest warrant for him and five others under South Korea's Capital Markets Act. Days later prosecutors asked Interpol for a red notice, a request to police worldwide to find and hold him, and moved to cancel his passport. By then he had left Singapore. Seoul prosecutors said he had gone through Dubai to Serbia.

On 23 March 2023 police at Podgorica airport in Montenegro stopped him as he tried to board a flight to Dubai on a forged Costa Rican passport. The same day a grand jury in New York charged him with eight counts of fraud and conspiracy. In June 2023 a Montenegrin court sentenced him to four months for the fake passport.

Both the United States and South Korea asked for him, and for 21 months Montenegro's courts could not settle which should have him. Judges approved one country, appeal courts overturned them, and the constitutional court paused the process. In December 2024 the decision went to the Justice Minister, Bojan Bozovic, who chose the United States. Kwon was flown to New York on 31 December 2024. Two days later he pleaded not guilty to nine counts, including securities fraud, commodities fraud, wire fraud and money laundering conspiracy. In theory they carried up to 130 years.

The civil case and the plea

The SEC had already beaten him. It sued Terraform Labs and Kwon for fraud in February 2023, and on 5 April 2024 a jury in New York found them both liable. In June 2024 they agreed to pay $4.47 billion, with about $204 million due from Kwon personally, and Terraform agreed to wind itself up. In January 2024 the company had filed for bankruptcy in Delaware.

On 12 August 2025 Kwon changed his plea. He admitted two counts, conspiracy to defraud and wire fraud, agreed to forfeit about $19 million, and accepted that he had misled investors about how UST had recovered in 2021. In return prosecutors agreed to ask for no more than 12 years and not to oppose a later request to serve part of his sentence in South Korea.

At sentencing in December, Engelmayer credited him with time already served, including about 17 months in Montenegro, and said a tough sentence was needed to deter the next founder tempted to do the same.

What comes next

Kwon must serve at least half of his US term before he can apply to transfer to a South Korean prison under the international prisoner transfer programme. The judge pressed prosecutors on whether Seoul would make him serve the rest. In South Korea he still faces separate charges over the same collapse, and a senior prosecutor has said a conviction there could add more than 30 years. His co-founder, Daniel Shin, has been on trial in Seoul since 2023 and denies wrongdoing.

The money chase has moved to other defendants. Todd Snyder, the administrator winding up Terraform, sued Jump Trading and two of its top executives for $4 billion in December 2025, accusing the firm of profiting from its secret deals with Terraform. In February 2026 he sued Jane Street, accusing it of trading on inside information during the May 2022 run. Both firms deny wrongdoing; Jane Street called the claims opportunistic. Jump's subsidiary Tai Mo Shan had already paid the SEC $123 million in December 2024 over its role in propping up UST in 2021. Victims who filed claims in Terraform's wind-down were warned that payouts could be far smaller than their losses.