Do Kwon sentenced to 15 years in prison, the crypto prison crew welcomes another heavyweight guest.

Original article | Odaily Planet Daily ( @OdailyChina )

Author｜Azuma ( @azuma_eth )

On December 11, Eastern Time, the Southern District of New York held a sentencing hearing for Do Kwon, the former co-founder of Terraform Labs, in courtroom 1305. At the hearing, Judge Paul Engelmayer sentenced Do Kwon to 15 years in prison.

Do Kwon has become yet another prominent figure in the industry to receive a severe criminal sentence, following FTX founder Sam Bankman-Fried and Celsius Network founder Alex Mashinky.

Terra's Myth and Collapse

Terra, an algorithmic stablecoin project developed by Terraform Labs (project token is LUNA, stablecoin is UST), was one of the most outstanding projects in the last bull market.

Algorithmic mechanisms were a major trend in stablecoin innovation during the last cycle. Unlike mainstream over-collateralization mechanisms, algorithmic stablecoins do not require full collateralization. Instead, they are designed around market supply and demand to dynamically maintain the "anchor" of the coin price. Taking Terra as an example, the protocol allows market participants to mint UST by burning an equivalent amount of LUNA, or conversely, burn UST to exchange for an equivalent amount of LUNA. When UST demand increases and the price rises above $1, arbitrage opportunities drive the market to burn LUNA to mint UST, profiting from the premium; conversely, if UST demand decreases and falls below $1, the market is driven to burn UST and mint LUNA, profiting from the discount.

This "left foot stepping on right foot" strategy between LUNA and UST once created Terra's growth miracle. UST's circulating supply once reached $18.7 billion, showing a strong trend of challenging USDT, the king of stablecoins; LUNA's price once approached $120, corresponding to a market capitalization of $41 billion, and it once ranked among the top five in the cryptocurrency market capitalization rankings.

However, history has proven that any stablecoin mechanism without sufficient collateral is doomed to failure. While it might be able to operate temporarily under normal market conditions, it is extremely vulnerable to risks in extreme situations. In May 2022, Terra's bubble finally burst. Amidst widespread panic, Terra's algorithmic stabilization mechanism caused it to sink deeper into a death spiral. Within just a few days, LUNA's market capitalization of tens of billions and UST's "value" of tens of billions vanished.

From a macro perspective, Terra's collapse is considered by many industry insiders to be one of the core events that led to the subsequent prolonged market downturn. From a micro perspective, Terra's failure caused countless investors to suffer huge losses, and some users even committed suicide out of despair.

Escape, hiding, capture and extradition

Following Terra's collapse, prosecutors in both South Korea and the United States filed charges against Do Kwon, including conspiracy to commit fraud, merchandise fraud, wire fraud, securities fraud, conspiracy to manipulate the market, and money laundering. In September 2022, South Korean prosecutors issued a red notice through Interpol, the global police agency, requesting police forces worldwide to assist in the arrest of Do Kwon.

Although Do Kwon remained active on social media and responded by saying "I'm not on the run," no one knew his exact location. It wasn't until a year later that people learned Do Kwon had actually been hiding in Serbia and Montenegro to evade Interpol's pursuit.

On March 23, 2023, Do Kwon, along with Terraform's Chief Financial Officer Han Chang-joon, attempted to fly from Podgorica, Montenegro, to Dubai using forged Costa Rican passports, but were arrested at the airport by local police. Approximately two hours before Do Kwon's arrest, an informant told Montenegrin's top police officer, Interior Minister Filip Adžić, that Do Kwon might be in the country. Adžić, recounting the arrest to the WSJ, stated that the informant sent Do Kwon's passport details to his phone, and when he called the border police chief, police had just apprehended Do Kwon at the airport.

The Interior Minister said in a phone call to the Border Police Chief: "Do you know who that person is? He's very famous and has a lot of money."

Odaily note: Photo of Do Kwon at the scene of his arrest.

After his arrest, Do Kwon was initially held in solitary confinement at the Spuz prison in Montenegro. On June 19, 2023, he was sentenced to four months in prison by a Montenegrin court for passport forgery. At the time, both South Korea and the United States sought Do Kwon's extradition from Montenegro. At the request of the US and South Korean authorities, the Montenegrin High Court subsequently extended Do Kwon's detention period.

In March 2024, Do Kwon was allowed to leave prison, but given that he still faced criminal charges in several countries, the Montenegrin High Court ordered the confiscation of his passport to prevent him from leaving the country. At that time, the extradition decision regarding Do Kwon was still pending; Montenegrin prosecutors opposed extraditing him to South Korea, preferring that he be sent to the United States, where he could face a longer sentence if convicted.

The suspense was finally resolved on the last day of 2024 when Montenegrin Prime Minister Milojko Spajic officially announced that the extradition procedures for Do Kwon to the United States had been completed.

On January 2, 2025, Do Kwon first appeared in public in a U.S. courtroom. At a hearing in Manhattan federal court that day, Do Kwon initially pleaded not guilty, but as the case progressed, he pleaded guilty in August of this year to two of the multiple charges against him (conspiracy to commit fraud and wire fraud).

Finally, on December 11, Judge Paul Engelmayer announced Do Kwon's sentence.

Sentencing controversy

Regarding Do Kwon's sentencing, the prosecution and the defense had differing opinions.

Last Thursday, U.S. federal prosecutors filed a request with a judge in the Southern District of New York, stating that Do Kwon should be sentenced to 12 years in prison.

On the other hand, Do Kwon's defense team requested a five-year prison sentence, arguing that Do Kwon has already served time in Montenegro and may face further prosecution in South Korea. However, U.S. officials argued that only a long prison sentence could demonstrate the scale of the fraud and deter similar behavior.

The prosecution argued that only a long prison sentence could demonstrate the scale of Do Kwon's fraud and deter similar behavior. For reference, losses related to the Terraform crash exceeded the combined losses of SBF's FTX and Alex Mashinky's Celsius and OneCoin. SBF faces 25 years in prison, while Mashinky has already been sentenced to 12 years for fraud.

Odaily Note: Cryptocurrency representatives who have been imprisoned in recent years

The prosecution wrote in the document: "The collapse of Terraform triggered a series of crises that swept through the cryptocurrency market and indirectly caused the subsequent industry downturn. Do Kwon fled the crisis, and while in hiding, he gave ambiguous statements in interviews and tweets, shifting blame to others. After being apprehended, he refused extradition... Do Kwon's misconduct, the consequences of his crimes, and his reaction to the exposure of his conspiracy are sufficient grounds for a severe sentence. In fact, the circumstances of the crime alone are sufficient to justify the maximum penalty."

Surprisingly, the judge's final sentence even exceeded the prosecution's requested 12-year sentence. Judge Paul Engelmayer stated that Do Kwon "chose to lie" and "made the wrong choice."

A hasty end to an era that has come to a close.

From SBF to Do Kwon, those names that were once admired by countless people are now ending in a very hasty manner.

In the narrative of the last bull market, projects like Terra and FTX represented the most radical, ambitious, and reckless expansionist forces in the crypto world. They rapidly accumulated enormous capital and prestige in the name of technological innovation, but ultimately fell into the abyss due to multiple factors such as regulatory gaps, uncontrolled risks, and human greed.

However, the industry's development will not halt due to the downfall of an individual. The crypto market has already entered a new cycle, with new stablecoin models, new financial primitives, and stricter regulatory requirements redefining the industry's underlying order. History will remember Terra's past glory, but it will also remember the price it paid—a reality and warning that all those who follow must face.