U.S. Prosecutors Seek 12-Year Sentence for Terraform Co-founder

2 mins mins

Key Points:

Prosecutors recommend a 12-year sentence for Terraform Labs’ co-founder Do Kwon.
Kwon’s fraudulent actions are linked to major crypto crises, including FTX’s collapse.
The sentencing decision will be made by Judge Paul Engelmayer on December 11.

U.S. prosecutors have recommended a 12-year prison sentence for Terraform Labs co-founder Do Kwon, citing massive fraud, with sentencing scheduled for December 11 in New York.

Kwon’s actions allegedly precipitated significant turmoil in the cryptocurrency realm, notably influencing the downfall of FTX, catalyzing calls for stricter regulatory measures.

U.S. Prosecution Drops 12-Year Bombshell on Do Kwon

U.S. prosecutors have accused Do Kwon of perpetrating fraud on a large scale, dramatically affecting the cryptocurrency market. Filed court documents state that Kwon’s false statements triggered crises, including the FTX collapse. This sentencing recommendation follows Terraform’s substantial market failure in mid-2022.

Regulatory oversight has intensified with this high-profile case, highlighting vulnerabilities in decentralized finance platforms. The TerraUSD (UST) and LUNA crash wiped out billions, prompting regulatory scrutiny worldwide. Terraform and Kwon face civil penalties from the SEC, including financial liabilities over $4.47 billion.

Public and industry reaction to this case is a mixture of anticipation and concern.

TerraUSD Collapse: Regulatory Wake-up Call

Did you know? The TerraUSD and LUNA collapse marked one of the largest algorithmic stablecoin failures, leading to significant regulatory actions and reshaping market dynamics in DeFi.

According to CoinMarketCap, Terra’s (LUNA) current price stands at $0.12, with a sharp 72.62% increase over the last 24 hours. The market cap totals $88.15 million, while the 24-hour trading volume surged by 1475.37% to $210.57 million. Despite recent gains, LUNA’s value has declined over longer periods.

terra-daily-chart-8 — Terra(LUNA), daily chart, screenshot on CoinMarketCap at 20:30 UTC on December 5, 2025. *Source: CoinMarketCap*

Coincu research suggests that Kwon’s sentencing may further catalyze crypto regulation, impacting the DeFi sector. Historical patterns show a trend toward stringent oversight following large collapses, potentially leading to technological adaptations within crypto ecosystems.

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