Good day everyone,
I hope you are all having a good day, welcome to CryptoGod-1's blog on all things crypto. In this post I will be looking at the news of Do Kwon being handed a 12 year prison sentence.
Do Kwon Gets 12 Year Sentence
The co-founder of Terraform Labs and orchestrater behind the $40 billion crypto collapse, Do Kwon, has admitted his role and guilt in the stablecoin's strength (or lack thereof) following his lie regarding the stability of the coin. Following his guilty plea to two felony counts of wire fraud and conspiracy to defraud, Do Kwon has been handed a 12-year prison sentence. The guilty plea was entered on Tuesday in the Southern District of New York and ended his prolonged legal standoff with U.S. prosecutors.
Previously Do Kwon had entered a not-guilty plea but his chance in stance may have been swayed by his now 12-year prison sentence, far below the maximum of 25 years, as long as Do Kwon commits no new crimes before sentencing. He will also face more than $19 million in financial penalties, and sentencing is set for December 11. Judge Paul Engelmayer noted in court:
“It will be up to me to decide what a just sentence for you would be.”
Kwon, who is now 33, admitted making false statements about the strength of TerraUSD’s peg, in particular how it was restored and the role undertaken by another firm. He acknowledged he knew these statements were untrue and ultimately led to his two counts of conspiracy to defraud and wire fraud. These came from the collapse of TerraUSD which was known as the algorithmic stablecoin once valued at billions of dollars. Kwon told the court:
“Between 2018 and 2022 in the SDNY and elsewhere, I knowingly agreed to participate in a scheme to defraud purchasers of cryptocurrencies from my company, Terraform Labs."
The design of TerraUSD was to maintain a $1 peg through its relationship with sister token Luna. However, the system came tumbling down in May 2022 as it wiped out tens of billions in value and sparking a cascade of failures across the crypto sector. Criminal charges were placed on Do Kwon in both the United States and Korea as the two nations looked for Kwon’s extradition. He was finally arrested in Montenegro in March 2023 as he travelled on forged documents before being later extradited to the United States in December.
Kwon had previously pleaded not guilty back in January to a nine count indictment which charged him with securities fraud, wire fraud, commodities fraud, and money laundering conspiracies. Prosecutors noted that Kwon and his company had misled investors about the stability of TerraUSD and the mechanisms supporting it, including during the crisis that ultimately caused its implosion. The U.S. Securities and Exchange Commission (SEC) also brought civil fraud charges in February 2023, alleging violations of federal securities laws.
United States Manhattan based attorney Jay Clayton noted in a statement:
"Do Kwon used the technological promise and investment euphoria around cryptocurrency to commit one of the largest frauds in history."
Back in April of this year a jury found both Terraform Labs and Kwon liable for civil fraud as they sided with the SEC’s claims that they deceived investors in connection with the buying and selling of Terraform securities. The deal given to Kwon is based on him accepting responsibility and staying out of trouble. Kwon acknowledged the facts of the indictment and confirmed his signature on the plea agreement:
“I am agreeing not to contest the factual allegations. I didn’t understand the details of international statutes… but yes they were illegal actions, Your Honour.”
While the case against Kwon has become one of the most interesting legal battles of the year, especially in terms of crypto’s short history, it is not the first and likely will not be the last of its kind. Kwon has already spent months in detention as authorities considered extradition requests from the U.S. and South Korea and Kwon still faces a nine-count U.S. criminal indictment which includes securities and wire fraud. Judge Paul Engelmayer has ordered his defence to submit a detailed statement of the charges he plans to admit to. Compared with the 25 year sentence handed to FTX CEO Sam Bankman-Fried back in 2024, who was behind another major cryptocurrency crash, it seems like Do Kwon has been handed a lenient sentence so far.
Have a great day.
Peace. CryptoGod-1.
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