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1Repair Windows errors before they cause bigger problems2Fix the driver behind crashes, sound loss and screen glitches3Clear out junk files and repair common Windows errorsDo Kwon was sentenced to 15 years in U.S. prison on December 11, 2025, after pleading guilty to two fraud counts tied to Terraform Labs and the collapse of TerraUSD (UST) and Luna (LUNA). The U.S. Department of Justice (DOJ) says the May 2022 crash caused more than $40 billion in investor losses. That figure is not the same as the tokens’ peak market value or the amount Kwon was ordered to forfeit.
Why was Do Kwon sentenced to 15 years?
U.S. District Judge Paul A. Engelmayer imposed the 15-year sentence after Kwon pleaded guilty to one count of conspiracy to commit commodities fraud, securities fraud and wire fraud, and one count of wire fraud. The DOJ said the two counts carried a combined statutory maximum of 25 years; 15 years was the sentence imposed, not the statutory maximum and not a term fixed by the plea.
The DOJ’s sentencing release describes the government’s view of the conduct: “Do Kwon devised elaborate schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit,” said Jay Clayton, then U.S. Attorney for the Southern District of New York. The quote is Clayton’s statement, not a quotation from Judge Engelmayer.
How did UST and LUNA work—and fail?
The promised dollar peg
Terraform Labs, co-founded by Kwon in 2018, promoted TerraUSD as a stablecoin designed to stay near $1. The Terra Protocol’s mechanism was described as allowing one UST to be exchanged for $1 worth of LUNA, and $1 worth of LUNA to be exchanged for one UST. The system relied on the relationship between the two tokens to support UST’s peg; it was not a guarantee backed by a conventional reserve of dollars for every token.
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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →The 2021 and 2022 peg failures
According to the DOJ, UST lost its peg in May 2021 and the protocol did not restore it. The DOJ says Kwon arranged for a high-frequency trading firm to buy UST to support its price, without disclosing that intervention in the way the public-facing algorithmic stabilization narrative implied.
UST’s peg broke again in May 2022, when the market was much larger. The DOJ says UST’s market capitalization was about nine times its May 2021 level and its daily trading volume was more than eight times as high. The tokens then collapsed, with the DOJ attributing more than $40 billion in investor losses to the crash.
What do the $40 billion, $50 billion and $19 million figures mean?
These figures describe different things and should not be treated as interchangeable. The DOJ’s 2025 releases report:
| Figure | What it measures |
|---|---|
| More than $40 billion | Investor losses the DOJ attributes to the May 2022 UST and LUNA crash. It is not a figure for money recovered or paid back to each victim. |
| More than $50 billion | Combined UST and LUNA market value at the spring 2022 peak. Market value is not the same measure as investor losses. |
| More than $19 million | Proceeds Kwon was ordered to forfeit, including his Terraform interest and cryptocurrency. Forfeiture is not equivalent to repaying $40 billion in losses. |
The DOJ’s figures and descriptions appear in its sentencing release and plea announcement.
What did the fraud case involve?
The criminal case was not limited to the mechanics of UST’s peg. The DOJ’s sentencing account says Kwon secretly controlled the Luna Foundation Guard (LFG), which had been presented as independent, and treated LFG and Terraform funds as interchangeable, misappropriating hundreds of millions of dollars. The DOJ also described deceptions involving Mirror Protocol, Chai and genesis stablecoins.
- Chai: The DOJ says Kwon represented that the Korean payment app processed transactions on Terra. Its account says Chai used traditional payment networks, while transactions were copied onto Terra to create the appearance of blockchain use.
- Mirror Protocol: The DOJ says Terraform presented Mirror as decentralized even though it controlled the protocol and used trading bots to manipulate synthetic-asset prices.
- UST’s stability: The DOJ says Terraform claimed the Terra Protocol mechanism maintained UST’s value, while the 2021 intervention by a trading firm was not disclosed as the public account suggested.
These are the government’s descriptions of the criminal case, not a separate technical audit. The DOJ’s account of the conviction and conduct is in its sentencing release.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How is the SEC case different from the criminal conviction?
The Securities and Exchange Commission (SEC) filed a separate civil action in February 2023. In its April 13, 2023 release, the SEC said it had charged Terraform and Kwon with a multi-billion-dollar crypto-asset securities fraud. The agency alleged, among other things, that they marketed UST as a yield-bearing stablecoin through Anchor Protocol, advertising returns of up to 20%, and misled investors about UST’s stability and Chai’s use of Terra.
Those were allegations in a civil action, distinct from Kwon’s later guilty plea and criminal sentence. The SEC’s description is available in its April 13, 2023 release.
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Does the sentence mean investors have been repaid?
No. The sentence and forfeiture order do not establish that victims have received money. The DOJ says seized property may become available for remission only after it is finally forfeited and monetized. Potentially eligible victims must meet criteria, including showing specific pecuniary loss directly caused by the offense and that they were not compensated through another means.
The DOJ describes remission as separate from the Terraform bankruptcy matter, which may offer another route for victims. Its case page does not say that distributions have occurred. For current case-specific notices, consult the DOJ case page and the Terraform Wind Down Trust.
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