Terraform Labs co-founder Do Kwon has been sentenced to 15 years in prison for what a US federal judge described as one of the most devastating financial frauds in modern history, following the 2022 collapse of the TerraUSD and Luna cryptocurrencies that wiped out an estimated $40 billion.

US District Judge Paul A. Engelmayer, delivering the sentence in Manhattan on Thursday, condemned Kwon for deceiving ordinary investors who trusted him with their savings.

“This was a fraud on an epic, generational scale,” the judge said. “There are few federal cases that have caused as much harm as you have, Mr. Kwon.”

Kwon, 34, pleaded guilty to conspiracy to defraud and wire fraud, admitting he misled investors about TerraUSD a stablecoin marketed to remain at $1 even during market volatility. Prosecutors said Kwon concealed the role of a high-frequency trading firm he secretly tasked with propping up the coin’s value when it slipped below its peg.

Wearing yellow prison clothing, Kwon apologised to victims, many of whom wrote emotional letters detailing their financial devastation.

“All of their stories were harrowing, I want to tell these victims that I am sorry,” he said.

One victim, Ayyildiz Attila, said he lost between $400,000 and $500,000, describing the collapse as “years of sacrifice erased.”

Prosecutors urged a minimum 12-year sentence, arguing Kwon’s scheme sparked a chain reaction that destabilised the crypto market. His lawyers requested no more than five years so he could eventually return to South Korea to face related charges.

US Attorney Jay Clayton said Kwon used “elaborate schemes” to manipulate crypto prices and attempted to evade accountability when the system crashed.

Kwon previously agreed to pay an $80 million civil fine and accept a ban from crypto activities as part of a broader $4.55 billion settlement with the US Securities and Exchange Commission. He also faces criminal prosecution in South Korea.

Under his plea arrangement, prosecutors will not oppose his potential transfer abroad after he serves half of his US sentence. (AriseNews TV)

•Police officers escort Do Kwon after he served sentence in prison for document forgery on March 23, 2024 in Podgorica, Montenegro. Image source,Getty Images

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