When Kwon was led into the courtroom by U.S. Marshals his head was bowed, his cheeks sunken as if he had lost a lot of weight. She wore a bright lemon-colored prison jumpsuit over a long-sleeved shirt, which had cuffs around her waist and arms.
In August, Kwon pleaded guilty to defrauding investors who purchased crypto coins issued by his company Terraform Labs. In May 2022, the sudden collapse of those coins wiped out $40 billion and caused a collapse in the crypto economy that bankrupted many other companies.
“The scope of Kwon’s fraud was enormous, spanning nearly every aspect of Terraform’s purported business,” U.S. prosecutors wrote in a recent court filing. “His massive lies left a trail of financial destruction in his wake.”
When given a chance to address the court on Thursday, Kwon said he takes full responsibility for the fraud. After thanking his former colleagues and supporters, some of whom had gathered in the public gallery, he became emotional. His lawyers left and right were patting him on the back.
The crimes to which Kwon pleaded guilty carry a maximum sentence of 25 years in prison. Before the hearing, prosecutors had petitioned for a 12-year prison sentence. But the presiding judge, Paul Engelmayer, ruled that a more punitive sentence was needed to deter future crypto fraudsters.
“This case will continue to serve as a reminder of what it means to break down a bad situation and what happens,” Engelmayer said in the courtroom. “In the next Du Quoin, if you commit fraud, you will lose your freedom for a long time.”
As Kwon was taken to an elevator outside the courtroom after his sentencing, Kwon appeared to be holding back tears. The chain hanging between his legs hit the floor.
not so stable coin
Kwon started Terraform in 2018 with co-founder Daniel Shin. Two years later, the company announced plans to launch TerraUSD (UST), a stablecoin whose value was pegged to the US dollar through algorithms. The algorithm will effectively link UST to another coin issued by the firm, LUNA. One dollar worth of LUNA can be exchanged for one dollar worth of UST, and vice versa. If UST ever falls below $1, traders will be incentivized to buy LUNA until the target price is restored.
“It was an interesting and very new mechanism,” Noel Acheson, an analyst who previously worked at crypto brokerage Genesis, told WIRED last year. “Many intelligent people believed it would work.”
In May 2022, the price-balancing system collapsed. When traders sold large amounts of UST, it slipped from its dollar peg, triggering panic selling that dropped the price to practically zero. In a now-infamous tweet, Kwon tried to stop the selloff, writing, “Deploying more capital – steady boys.” But the value of UST and LUNA fell, wiping out $40 billion from the market.
<a href