Introduction
Federal prosecutors are urging a judge to impose the maximum 12-year prison sentence on Terra founder Do Kwon for his role in the $40 billion collapse of the UST and LUNA cryptocurrencies. The Department of Justice argues that a lighter sentence would create unfair disparities compared to the 25-year term given to FTX’s Sam Bankman-Fried. Kwon’s sentencing is scheduled for December 11 in Manhattan.
Key Points
- Prosecutors argue Kwon's $40 billion fraud dwarfs the $5 billion in losses from Celsius founder Alex Mashinsky, who received 12 years.
- The DOJ noted Kwon's use of forged passports to evade capture, contrasting his conduct with other defendants who didn't flee.
- Kwon's legal team requested only a 5-year sentence, which prosecutors called unjustifiable given the scale of harm and precedent.
The DOJ's Argument for Maximum Sentencing
In a legal filing submitted late Thursday, the U.S. Department of Justice formally requested that U.S. District Judge Paul Engelmayer sentence Do Kwon to the full 12-year prison term allowed under the plea deal signed in August. This deal was struck to encourage Kwon, the 34-year-old Korean national and founder of Terraform Labs, to forgo a jury trial and plead guilty to two crimes: conspiracy to defraud and wire fraud. While technically eligible for up to 25 years, the DOJ had promised to cap its request at 12 years as part of that agreement. Now, prosecutors are advocating for the maximum under that cap, arguing anything less would be unjust.
The core of the DOJ’s position hinges on preventing “unwarranted sentencing disparities” with other landmark crypto fraud cases. Prosecutors drew a direct comparison to FTX founder Sam Bankman-Fried, who was sentenced to 25 years in prison after being found guilty on seven fraud and conspiracy charges related to his exchange’s $32 billion implosion. “Judge Kaplan imposed a sentence of 25 years on Bankman-Fried who, like Kwon, perpetrated a fraud of staggering proportions in his twenties and then attributed his brazen criminal conduct in part to youth and inexperience,” the prosecutors wrote. They explicitly rejected the notion that Kwon’s decision to plead guilty, unlike Bankman-Fried who exercised his right to a trial, justifies a dramatically lighter sentence, calling a potential 20-year difference “scarcely” justifiable.
Contrasting Kwon's Case with Celsius and Highlighting Conduct
The Department of Justice also countered arguments from Kwon’s defense team, which had suggested he receive a “far shorter sentence” than Celsius founder Alex Mashinsky. Mashinsky was sentenced to 12 years in prison in 2025 for misappropriating customer crypto and manipulating his firm’s token price. Prosecutors dismissed this comparison, stating, “the magnitude of Mashinsky’s crime pales in comparison to Kwon’s: $5 billion versus $40 billion in investor losses.” This stark contrast in financial damage—$40 billion wiped out in the Terra collapse versus $5 billion in the Celsius case—forms a central pillar of the government’s argument for a severe penalty.
Beyond the scale of the fraud, the DOJ highlighted Kwon’s conduct following the collapse as aggravating. Prosecutors noted that while Mashinsky was not detained before trial and contested the charges, “neither did he obtain a fake passport and try to live on the lam in a foreign country.” This reference is to Kwon’s arrest in Montenegro in 2023, where he was convicted of traveling with forged passports months after warrants were issued for his arrest in both the United States and South Korea. After a protracted legal battle over jurisdiction, Kwon was extradited to New York earlier this year. This attempt to evade capture, according to the filing, further distinguishes his case and warrants a stern sentence.
The Road to Sentencing and What's at Stake
The sentencing of Do Kwon represents a pivotal moment in the ongoing regulatory and legal reckoning for the cryptocurrency industry. The collapse of Terra’s algorithmic stablecoin UST and its sister token LUNA in May 2022 did not merely result in catastrophic losses for direct investors; it triggered a cascading crisis of “contagion” that ultimately contributed to the downfall of other major firms, including FTX. This chain reaction amplified the systemic impact of Kwon’s actions far beyond his own platform.
Kwon’s legal team has requested a significantly lighter sentence of just five years, a position the DOJ has forcefully opposed. With sentencing set for December 11 in Manhattan, Judge Engelmayer must now weigh the prosecution’s call for a 12-year term—justified by comparisons to Bankman-Fried and Mashinsky, the unprecedented $40 billion scale of the loss, and Kwon’s post-collapse conduct—against the defense’s plea for leniency. The outcome will set a critical precedent for how the U.S. judicial system penalizes misconduct at the highest levels of the volatile crypto market, sending a clear signal about the consequences for fraud that causes widespread financial harm.
📎 Related coverage from: decrypt.co