US Seeks 12-Year Sentence for Do Kwon Over TerraUSD/LUNA $40B Collapse

U.S. federal prosecutors have asked a Manhattan judge to impose a 12-year prison sentence on Terraform Labs co-founder Do Kwon for his role in the May 2022 collapse of the TerraUSD (UST) algorithmic stablecoin and LUNA, events that erased roughly $40 billion in market value. Kwon pleaded guilty in 2025 to conspiracy, commodities fraud, securities fraud and wire fraud; his plea agreement caps recommended sentencing at 12 years (the original indictments carried statutory maximums up to 25 years). Prosecutors allege Kwon made false statements and concealed third‑party support — notably Jump Trading’s involvement during a May 2021 depeg — actions that helped trigger cascading market failures and wider industry turmoil cited alongside events like FTX. Sentencing is set for December 11, 2025 before U.S. District Judge Paul Engelmayer. The prosecution seeks forfeiture of about $19.3 million and declined to pursue broad investor restitution because of the global, complex nature of losses. Kwon’s defense requests a five‑year term, citing nearly two to three years detained abroad (in Montenegro) and harsh conditions; he also faces a separate criminal case in South Korea where prosecutors seek much longer penalties. The case renews debate about sentencing parity in major crypto frauds (contrasting Kwon’s plea and 12‑year recommendation with Sam Bankman‑Fried’s 25‑year sentence after trial). For traders, the prosecution underscores sustained regulatory and enforcement risk for projects tied to algorithmic or under‑collateralized tokens, may heighten scrutiny on stablecoin governance and transparency, and could influence market sentiment around similar tokens and related DeFi projects.