Prosecutors Seek 12-Year Sentence for Do Kwon

U.S. federal prosecutors have urged a New York judge to sentence Do Kwon, Terraform Labs co-founder, to 12 years for fraud related to the Terra/LUNA collapse, with sentencing on December 11, 2025.

The sentencing request underscores legal accountability in crypto, influencing market confidence and regulatory scrutiny in the industry.

Background

Do Kwon, who pled guilty, played a pivotal role in the Terra blockchain’s creation. His fraudulent actions, according to the U.S. Attorney’s Office, led to multibillion-dollar losses, marking a significant enforcement action by SDNY.

Impact of the Collapse

The Terra/LUNA collapse caused significant market upheaval in 2022. Tokens connected to Terra, like LUNA and USTC, have been structurally impacted, though current market sentiment appears unaffected by the recent 12-year sentencing request.

With multibillion-dollar losses, authorities emphasize the need for restitution, with precise figures yet to be disclosed. The public misrepresentation by Terraform Labs underscores the criminal consequences facing crypto projects with misleading representations.

Regulatory Implications

Past cases reveal that fraud convictions often align with significant prison terms. This move reinforces the regulatory framework against crypto fraud, potentially influencing future stablecoin regulations and ensuring tighter scrutiny on crypto ventures.

Regulatory bodies focus on preventing large-scale fraud and protecting investors. This case could set a precedent, highlighting that algorithmic stablecoins and high-yield projects must adhere to stringent standards to avoid legal repercussions.