United States Attorney for the Southern District of New York, Jay Clayton, announced that Do Hyeong Kwon, co-founder of Terraform Labs, has been sentenced to 15 years in federal prison for orchestrating multiple fraudulent schemes tied to the collapse of TerraUSD (UST) and LUNA.
Kwon, who was extradited to the U.S. on December 31, 2024, pleaded guilty in August 2025 before U.S. District Judge Paul A. Engelmayer, who delivered the sentence on Thursday.
Clayton said Kwon “devised elaborate schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit,” adding that the defendant attempted to cover up his crimes through a deceptive public-relations push, laundering illicit proceeds, and even seeking political protection abroad.
“Fraud is fraud,” Clayton stated, vowing continued pursuit of criminals who exploit the digital-asset ecosystem.
According to court filings, Kwon’s misconduct spanned from 2018 to 2022, during which he promoted Terraform’s algorithmic stablecoin system, the “Terra Protocol,”as a self-sustaining decentralized financial network. Terraform claimed UST would always maintain its $1 peg through automated market mechanisms involving LUNA.
However, prosecutors revealed that Kwon secretly relied on a high-frequency trading firm to artificially restore UST’s peg after it dropped below 92 cents in May 2021.
Prosecutors further detailed that Kwon falsely portrayed the Luna Foundation Guard (LFG) as an independent reserve meant to defend UST’s peg.
In reality, Kwon controlled both Terraform and LFG, made unilateral financial decisions, and misappropriated hundreds of millions of dollars in LFG assets, which were later laundered through complex transactions.
Kwon also misled investors about Mirror Protocol, an app that purported to offer decentralized synthetic stock trading. Despite public claims of user-governed decentralization, he secretly directed the protocol, manipulated asset prices using trading bots, and inflated user metrics.
Additionally, Kwon falsely asserted that the Korean payments app Chai processed billions in transactions through the Terra blockchain. Instead, Chai used traditional payment rails, while Kwon duplicated transactions onto the blockchain to fabricate adoption.
Kwon now faces 15 years behind bars for wire fraud, securities fraud conspiracy, commodities fraud conspiracy, and related charges.