Do Kwon, co-founder of Terraform Labs, has formally requested that a U.S. federal judge cap his prison sentence at five years for his role in the 2022 collapse of the TerraUSD (UST) stablecoin and its sister token Luna, which resulted in approximately $40 billion in investor losses.
This request was filed on November 26, 2025, in Manhattan federal court, ahead of his sentencing hearing scheduled for December 11, 2025, before U.S. District Judge Paul Engelmayer.
The case stems from criminal charges of conspiracy and wire fraud brought by the U.S. Department of Justice, accusing Kwon of misleading investors about the stability of Terra’s algorithmic stablecoin ecosystem.
Kwon pleaded guilty in August 2025 to two counts of wire fraud and conspiracy to defraud, shortly after his extradition from Montenegro where he had been detained since March 2023 on unrelated forgery charges.
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Under the plea deal, prosecutors agreed to recommend no more than 12 years in prison, a significant reduction from the statutory maximum of 25 years. However, Kwon’s legal team argues that even this is “far greater than necessary,” proposing five years as “more than sufficient” punishment.
In the court filing, Kwon’s lawyers highlighted: Nearly three years already served in detention, including over half under “brutal conditions” in Montenegro. Kwon’s acceptance of civil penalties, including forfeiture of over $19 million in assets.
The broader context of his remorse, as expressed in a prepared statement during the plea: “What I did was wrong, and I want to apologize for my actions.” Kwon faces a separate trial in South Korea for the same conduct, where prosecutors are seeking up to 40 years.
While bound by the plea to cap their recommendation at 12 years, federal sentencing guidelines for fraud of this scale with massive victim impact could suggest far longer terms—potentially approaching life before caps.
Legal experts anticipate the judge may impose 15–20 years, given Engelmayer’s history of strict sentences in financial fraud cases. The Terra ecosystem imploded in May 2022 when UST—a stablecoin meant to maintain a $1 peg through an algorithmic balance with Luna—depegged catastrophically.
This triggered a death spiral, wiping out $40 billion in market value and contributing to broader crypto market turmoil, including the downfall of FTX. The SEC’s parallel civil case against Kwon and Terraform Labs concluded in 2024 with a jury finding them liable for deceiving investors, resulting in additional fines and bans.
This development echoes other high-profile crypto fraud sentencings, such as Sam Bankman-Fried’s 25-year term in 2024 for the FTX collapse involving $8–10 billion in losses. Kwon’s plea has reduced his exposure compared to a trial, but the request for a lenient cap has sparked debate on X and in crypto communities about accountability for systemic risks in decentralized finance.
Observers note that while Kwon’s case highlights regulatory crackdowns on stablecoin fraud, it also underscores ongoing challenges in extradition and international jurisdiction for crypto executives. Post-U.S. sentencing, South Korean authorities are expected to pursue their case aggressively.
Do Kwon’s request for a five-year prison cap highlights the complexities of sentencing in high-stakes financial fraud cases, particularly those involving emerging technologies like blockchain.
Under federal guidelines, fraud causing $40 billion in losses could theoretically justify sentences approaching life imprisonment, but Kwon’s August 2025 guilty plea to conspiracy and wire fraud limited the statutory maximum to 25 years, with prosecutors bound to recommend no more than 12.
His defense argues for proportionality, citing nearly three years already served including over 18 months in “brutal” Montenegrin conditions, $19 million in asset forfeitures, and a public apology where Kwon accepted full responsibility.
However, Judge Paul Engelmayer’s track record in fraud cases suggests a likely outcome of 15–20 years, emphasizing victim impact and deterrence. A lenient sentence could set a precedent for crediting pre-trial detention in international extraditions.
While a harsher one might reinforce aggressive U.S. prosecution of white-collar crypto crimes. Post-U.S. sentencing, Kwon’s transfer to South Korea for a parallel trial—where prosecutors seek up to 40 years—could invoke double jeopardy challenges, though treaties allow concurrent jurisdiction for cross-border fraud.
He must serve at least half his U.S. term before transfer eligibility, potentially extending his total incarceration to decades and underscoring the risks of multi-jurisdictional accountability for global crypto executives.