Jay Clayton, U.S. Attorney for the Southern District of New York | Department of Justice
Do Hyeong Kwon, co-founder of Terraform Labs PTE, Ltd., was sentenced to 15 years in prison for wire fraud and conspiracy related to securities and commodities fraud. The sentencing was announced by Jay Clayton, United States Attorney for the Southern District of New York. Kwon had been extradited on December 31, 2024, and pleaded guilty in August 2025 before U.S. District Judge Paul A. Engelmayer.
“Do Kwon devised elaborate schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit,” said U.S. Attorney Jay Clayton. “When his crimes caught up to him, Kwon embarked on a deceptive public relations campaign to cover up his fraud, laundered the proceeds of his illegal schemes, and sought to purchase political protection in foreign countries to evade criminal prosecution. Let there be no mistake, fraud is fraud whether it takes place on our streets, in our securities markets, or in our emerging and important digital asset ecosystem, and no matter where in the world criminals may seek refuge, the women and men of the Southern District of New York will relentlessly pursue justice for investors and protect the integrity of financial markets.”
According to court documents and statements made during proceedings, from at least 2018 through 2022 Kwon orchestrated fraudulent schemes targeting purchasers of cryptocurrencies created by Terraform Labs. The company promoted its blockchain as innovative due to its issuance of algorithmic stablecoins under what it called the “Terra Protocol.” In September 2020, Terraform launched TerraUSD (UST), a stablecoin pegged to the U.S. dollar with promotional materials claiming that one UST could always be exchanged for $1 worth of LUNA—the native token—under any market conditions.
Kwon presented Terraform as having developed advanced decentralized finance technologies that operated autonomously through economic incentives rather than direct control by himself or associates. However, investigations revealed that core products were manipulated to create an illusion of functionality and decentralization designed to attract investors.
The government outlined several key misrepresentations:
- Kwon falsely claimed that TerraUSD’s peg was maintained solely by an algorithm when it was actually restored through secret intervention by a trading firm purchasing large amounts of UST.
- He misrepresented Luna Foundation Guard Ltd. (LFG) as independent while maintaining personal control over both LFG and Terraform funds.
- He claimed Mirror Protocol operated independently when he secretly controlled it using trading bots funded with stablecoins created at launch.
- He asserted that Korean payment application Chai used Terra blockchain technology when transactions were processed via traditional networks; fake blockchain records were generated instead.
- Misleading disclosures about initial supplies (“Genesis Stablecoins”) allowed their use for manipulative purposes contrary to investor communications.
These actions attracted both institutional and retail investment globally. At its peak in spring 2022, combined market value for UST and LUNA exceeded $50 billion. Growth followed deceptions about product reliability including efforts by Kwon’s team to mask vulnerabilities after UST lost its peg in May 2021.
By May 2022—with increased scale—UST again lost its peg leading both tokens’ collapse resulting in more than $40 billion in investor losses.
Following this crash amid multiple government investigations worldwide, Kwon publicly claimed cooperation but privately discussed evading accountability including seeking political protection abroad.
Kwon was arrested on March 23, 2023 in Montenegro attempting travel with a fraudulent passport.
In addition to imprisonment, Kwon must forfeit over $19 million gained from these illegal activities including interests tied directly to Terraform assets.
Jay Clayton credited investigative work by various FBI divisions along with assistance from international partners such as Montenegro’s Ministry of Justice and Korea’s Ministry of Justice. The Securities and Exchange Commission also previously conducted a civil action against Kwon.
The case was prosecuted by Assistant U.S. Attorneys Marguerite B. Colson, Sarah Mortazavi, and Kimberly Ravener under the Office’s Securities and Commodities Fraud Task Force.
