U.S. federal prosecutors are in search of a 12-year jail sentence for Do Kwon, the founding father of Terraform Labs, the agency behind the algorithmic stablecoin UST that imploded spectacularly greater than three years in the past.
The request, filed on Thursday to the choose of Southern District of New York, comes after Kwon pleaded responsible earlier this yr. He admitted to defrauding buyers and manipulating the crypto markets by way of a sequence of false claims about his firm’s blockchain merchandise.
Whereas Kwon’s protection staff requested a five-year sentence, citing time served in Montenegro and potential prosecution in South Korea, U.S. officers argued that solely a prolonged jail time period would replicate the size of the fraud and deter related conduct.
“The Terraform market crash triggered a cascade of crises that swept by way of cryptocurrency markets and contributed to what has since develop into often called ‘Crypto Winter,’ the prosecutors wrote. “Kwon fled from the wreckage and, whereas in hiding, dissembled in interviews and tweets, blamed others for what had occurred, and, as soon as discovered, resisted extradition.”
“Kwon’s misconduct, the results of his crime, and his response to the invention of his scheme all warrant a considerable jail time period,” they added. “Certainly, the circumstances of the offense, standing alone, would weigh strongly in favor of a most sentence.”
Prosecutors mentioned within the submitting that losses tied to the Terraform crash surpassed these attributable to the collapse of Sam Bankman-Fried’s FTX, Alex Mashinky’s Celsius and OneCoin mixed.
Bankman-Fried is at the moment serving a 25-year jail sentence, whereas Mashinsky was sentenced to 12 years in jail for fraud.
Terra-Luna crash
The collapse of the Terraform ecosystem, which reached over $50 billion in market worth at its peak, was a pivotal second for the brutal crypto market downturn in 2022.
On the middle of the ecosystem was the algorithmic stablecoin UST, which was backed by a balancing mechanism linked to crypto token LUNA, as a substitute of extra tangible property resembling short-term U.S. Treasuries, like most present stablecoins.
On the time, Kwon portrayed Terraform’s choices as decentralized and technologically sound. Nonetheless, the challenge relied on backdoor agreements, hidden buying and selling exercise and misleading metrics to keep up its look of success, in keeping with courtroom filings.
Kwon’s sentencing will happen on December 11 in Manhattan federal courtroom.