New York
AP
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Onetime cryptocurrency mogul Do Kwon was sentenced Thursday to 15 years in prison after a $40 billion crash revealed his crypto ecosystem to be a fraud. Victims mentioned the 34-year-old monetary know-how whiz weaponized their belief to persuade them that the funding — secretly propped up by money infusions — was protected.
Kwon, a Stanford graduate recognized by some as “the cryptocurrency king,” apologized after listening as victims — one in court docket and others by phone — described the rip-off’s toll: wiping out nest eggs, depleting charities and wrecking lives. One instructed the decide in a letter that he contemplated suicide after his father misplaced his retirement cash in the scheme.
Judge Paul A. Engelmayer mentioned at a daylong sentencing listening to in Manhattan federal court docket that the federal government’s suggestion of 12 years in prison was “unreasonably lenient” and that the protection’s request for 5 years was “utterly unthinkable and wildly unreasonable.” Kwon confronted a most sentence of 25 years in prison.
“Your offense caused real people to lose $40 billion in real money, not some paper loss,” Engelmayer instructed Kwon, who sat on the protection desk in a yellow jail swimsuit. The decide known as it “a fraud on an epic, generational scale” and mentioned Kwon had an “almost mystical hold” on buyers and brought about incalculable “human wreckage.”
More than the mixed losses in FTX and OneCoin instances
Kwon pleaded responsible in August to fraud costs stemming from the collapse of Terraform Labs, the Singapore-based agency he co-founded in 2018. The loss exceeded the mixed losses from FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood’s frauds, prosecutors mentioned. Engelmayer estimated there might have been 1,000,000 victims.
Terraform Labs had touted its TerraUSD as a dependable “stablecoin” — a sort of forex usually pegged to secure belongings to forestall drastic fluctuations in costs. But prosecutors say it was an phantasm backed by outdoors money infusions that got here crumbling down after it plunged far under its $1 peg. The crash devastated buyers in TerraUSD and its floating sister forex, Luna, triggering “a cascade of crises that swept through cryptocurrency markets.”
Kwon tried to rebuild Terraform Labs in Singapore earlier than fleeing to the Balkans on a false passport, prosecutors mentioned. He’s been locked up since his March 2023 arrest in Montenegro. He was credited for 17 months he spent in jail there earlier than being extradited to the U.S.
Kwon agreed to forfeit over $19 million as a part of his plea deal. His attorneys argued his conduct stemmed not from greed, however hubris and desperation. Engelmayer rejected his request to serve his sentence in his native South Korea, the place he additionally faces prosecution and the place his spouse and 4-year-old daughter reside.
“I have spent almost every waking moment of the last few years thinking of what I could have done different and what I can do now to make things right,” Kwon instructed Engelmayer. Hearing from victims, he mentioned, was “harrowing and reminded me again of the great losses that I have caused.”
One sufferer, talking by phone, mentioned his spouse divorced him, his sons had to skip faculty, and he had to transfer again to Croatia to reside together with his dad and mom after TerraUSD’s crash evaporated his household’s life financial savings. Another mentioned he has to “live with the guilt” of persuading his in-laws and a whole lot of nonprofit organizations to make investments.
Stanislav Trofimchuk mentioned his household’s funding plummeted from $190,000 to $13,000 — “17 years of our life, gone” throughout what he described as “two weeks of sheer terror.”
Chauncey St. John, talking in court docket, mentioned some nonprofits he labored with misplaced greater than $2 million and a church group misplaced about $900,000. He and his spouse are saddled with debt and his in-laws have been compelled to work effectively previous their deliberate retirement, he mentioned.
Nevertheless, St. John mentioned, he forgives Kwon and “I pray to God to have mercy on his soul.”
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A prosecutor learn excerpts from a few of greater than 300 letters submitted by victims, together with an individual recognized solely by initials who misplaced practically $11,400 whereas juggling payments and making an attempt to full faculty. Kwon had made Terra appear to be a protected place to stash financial savings, the particular person mentioned.
“To some that is just a number on a page, but to me it was years of effort,” the particular person wrote. “Watching it evaporate, literally overnight, was one of the most terrifying experiences of my life.”
“What happened was not an accident. It was not a market event. It was deception,” the particular person added, imploring the decide to “consider the human cost of this tragedy.”
Kwon created an “illusion of resilience while covering up systemic failure,” Assistant US Attorney Sarah Mortazavi instructed Engelmayer. “This was fraud executed with arrogance, manipulation and total disregard for people.”