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New York, Dec 12 (AP) One-time cryptocurrency mogul Do Kwon was sentenced Thursday to 15 years in prison after a USD 40 billion crash revealed his crypto ecosystem to be a fraud. Victims said the 34-year-old financial technology whiz weaponised their trust to convince them that the investment -- secretly propped up by cash infusions -- was safe.
Kwon, a Stanford graduate known by some as "the cryptocurrency king," apologised after listening as victims -- one in court and others by telephone -- described the scam's toll: wiping out nest eggs, depleting charities and wrecking lives. One told the judge in a letter that he contemplated suicide after his father lost his retirement money in the scheme.
Engelmayer said the government's recommendation of a 12-year prison sentence was "unreasonably lenient" and the defense's request for five years was "utterly unthinkable and wildly unreasonable." Kwon faced a maximum sentence of 25 years in prison.
"Your offence caused real people to lose USD 40 billion in real money, not some paper loss," Engelmayer told Kwon. The judge called it "a fraud on an epic, generational scale" and said Kwon had an "almost mystical hold" on investors and caused incalculable "human wreckage." Kwon pleaded guilty in Manhattan federal court in August to fraud charges stemming from the collapse of Terraform Labs, the Singapore-based firm he co-founded in 2018. The loss exceeded the combined losses from FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood's frauds, prosecutors said. Engelmayer estimated there may have been a million victims.
Terraform Labs had touted its TerraUSD as a reliable "stablecoin", a kind of currency typically pegged to stable assets to prevent drastic fluctuations in prices. But prosecutors say it was an illusion backed by outside cash infusions that came crumbling down after it plunged far below its USD 1 peg. The crash devastated investors in TerraUSD and its floating sister currency, Luna, triggering "a cascade of crises that swept through cryptocurrency markets." Kwon tried to rebuild Terraform Labs in Singapore before fleeing to the Balkans, prosecutors said. He spent 17 months in jail in Montenegro after his March 23, 2023, arrest while travelling on a false passport.
Kwon agreed to forfeit over USD 19 million as part of his plea deal. His lawyers argued his conduct stemmed not from greed, but hubris and desperation. Engelmayer rejected his request to serve his sentence in his native South Korea, where he also faces prosecution and where his wife and four-year-old daughter live.
"I have spent almost every waking moment of the last few years thinking of what I could have done different and what I can do now to make things right," Kwon told Engelmayer. Hearing from victims, he said, was "harrowing and reminded me again of the great losses that I have caused." One victim, speaking by telephone, said his wife divorced him, his sons had to skip college and he had to move back to Croatia to live with his parents after TerraUSD's crash evaporated his family's life savings. Another said he has to "live with the guilt" of persuading his in-laws and hundreds of nonprofit organisations to invest.
Stanislav Trofimchuk said his family's investment plummeted from USD 1,90,000 to USD 13,000, "17 years of our life, gone" during what he described as "two weeks of sheer terror." Chauncey St John, speaking in court, said some nonprofits he worked with lost more than USD 2 million and a church group lost about USD 9,00,000. He and his wife are saddled with debt and his in-laws have been forced to work well past their planned retirement, he said.
Nevertheless, St John said, he forgives Kwon and "I pray to God to have mercy on his soul." A prosecutor read excerpts from some of more than 300 letters submitted by victims, including a person identified only by initials who lost nearly USD 11,400 while juggling bills and trying to complete college. Kwon had made Terra seem like a safe place to stash savings, the person said.
"To some that is just a number on a page, but to me it was years of effort," the person wrote. "Watching it evaporate, literally overnight, was one of the most terrifying experiences of my life." "What happened was not an accident. It was not a market event. It was deception," the person added, imploring the judge to "consider the human cost of this tragedy." Kwon created an "illusion of resilience while covering up systemic failure," Assistant US Attorney Sarah Mortazavi told Engelmayer. "This was fraud executed with arrogance, manipulation and total disregard for people."
This report includes content sourced from Press Trust of India (PTI), edited for clarity and context.
