U.S. prosecutors seek 12-year prison sentence for Do Kwon over Terra collapse

U.S. federal prosecutors asked a New York judge to impose a 12-year prison sentence on Terraform Labs co-founder Do Kwon, arguing that the 2022 collapse of TerraUSD [UST] and LUNA amounted to one of the most destructive financial frauds in crypto history. 

Prosecutors filed the request on 4 December in the Southern District of New York, according to reports from InnerCityPress and Bloomberg Law.

Prosecutors claim Terra fraud exceeds major crypto scandals

According to the government’s sentencing memorandum, Kwon’s actions triggered losses that exceeded the combined impact of other major crypto scandals, including those involving Sam Bankman-Fried, Alex Mashinsky, and OneCoin’s Karl Sebastian Greenwood. 

The filing describes the Terra crash as a “colossal crypto fraud” that rippled through global markets, wiping out tens of billions of dollars and contributing to the wider crypto winter.

Prosecutors emphasized that Kwon’s conduct “stands apart” from other recent fraud cases due to the scale of losses, the speed of the collapse, and the systemic impact on the broader digital asset ecosystem. 

They noted that the design and promotion of UST, a so-called algorithmic stablecoin, misled investors into believing it was stable and fully backed, even as internal data allegedly showed it was prone to failure.

Defense seeks five years or less

Kwon’s defense team previously asked the court to impose no more than five years, pointing to time he has already served in Montenegro while awaiting extradition proceedings. 

They also argued that a lengthy U.S. sentence would be disproportionate given the possibility of additional prosecution in South Korea.

Prosecutors rejected those arguments, stating that Kwon’s actions warrant a sentence consistent with the severity of the losses and the need for deterrence in a rapidly evolving financial sector.

What happens next

Judge Paul A. Engelmayer will consider both sides’ submissions before delivering a final sentence on 11 December. 

Kwon’s extradition status remains unresolved, but the U.S. has expressed a clear intent to bring him to trial and secure a federal sentence for his role in the collapse of the Terra ecosystem.

Final Thoughts

• Do Kwon now faces one of the harshest proposed sentences in crypto-related prosecutions.
• The government’s request signals a new era of aggressive accountability for large-scale digital asset failures.