Kwon, who pleaded guilty to two criminal counts in August, had asked for a sentence of five years, while federal prosecutors had sought a sentence of no more than 12 years, The Wall Street Journal reported Thursday (Dec. 11).
The prosecutors had agreed to limit the sentence they sought and dropped seven other counts in exchange for Kwon’s guilty plea on one count of wire fraud and one count of conspiracy to commit wire, securities and commodities fraud, according to the report.
Before the sentencing, in their closing arguments, prosecutors said Kwon had lied about the safety of his products and then, when his deception was exposed, minimized the severity of his actions, per the report.
Kwon’s defense team characterized him as a brash entrepreneur who tried to build a useful technology, according to the report.
The Financial Times reported that the judge sentenced Kwon to more jail time than the prosecutors had requested.
The judge said Kwon had committed “fraud on an epic, generational scale,” per the report.
The TerraUSD stablecoin began its spiral in May 2022 after it broke its dollar peg.
Unlike other top stablecoins, TerraUSD’s dollar peg was not backed by hard assets such as fiat or other financial instruments of varying quality. Instead, it was an “algorithmic” stablecoin whose peg was supported by an automated arbitrage mechanism with a second free-floating cryptocurrency, Luna.
The run and collapse of TerraUSD, which had been the No. 3 stablecoin by market capitalization, and Luna sparked a growing sense of panic that led to a crypto crisis.
When Kwon pleaded guilty to fraud in August, the United States Attorney for the Southern District of New York, Jay Clayton, said in a press release that the maximum sentence for the two counts, combined, was 25 years in prison but that a judge will determine the sentencing.
“Do Kwon used the technological promise and investment euphoria around cryptocurrency to commit one of the largest frauds in history,” Clayton said.
