TerraUSD Creator, Do Kwon, Sentenced to Prison
If you’ve been watching the news, then you already know that Do Kwon, the creator behind both TerraUSD and Luna, has been sentenced to prison. But who is Do Known exactly, and did he knowingly swindle the users of his platform out of millions of dollars?
Read on to discover the details of the investigation into Do Kwon and his subsequent prison sentence.
Who is Do Kwon?
Do Kwon, born under the full name Kwon Do-hyung, was born in South Korea in 1991. He went on to become the cofounder and CEO of Terraform Labs in 2018, the company behind the TerraUSD stablecoin and Luna cryptocurrency.
Do Kwon is well known in the cryptocurrency space and consulted on many other tokens outside of those created by Terraform Labs. Some examples include Mirror, Prism, Astroport, and Anchor.
Unfortunately, the higher the climb, the further the fall, and TerraLuna collapsed in May 2022. However, Kwon tried to revamp with a token known as Luna 2.0. He was overall unsuccessful.
What was TerraUSD?
TerraUSD, traded via the symbol UST, was an algorithmic stablecoin. This means it was a stablecoin pinned to an algorithm rather than fiat assets. UST was created when Luna (the sister cryptocurrency token) was burned and vice versa. It was originally pinned to the value of the US dollar, with 1 UST being worth $1 USD. When 1 UST would fluctuate to be worth slightly more, miners would burn LUNA to create more UST, thus holding it stable in a roundabout way.
What was Luna?
Luna was the cryptocurrency that was paired with TerraUSD to stabilize it. As mentioned above, Luna could be burned to create UST, and vice versa. The functioning of the blockchain was elaborate, using changing market conditions to influence individuals to burn one coin in one direction based on fluctuating prices.
What Happened to TerraLuna?
For several years, TerraLuna worked well, so well that many large cryptocurrency companies, like Binance, took the plunge and invested. Individuals loved the simple burn mechanism, and the company enjoyed the stability of a stablecoin paired with minting a cryptocurrency.
However, Do Kwon overlooked one major aspect in the TerraLuna whitepaper, and that was the fact that the burn balance mechanism was designed based on normal market conditions. Kwon forgot, or neglected to think through, what would happen in abnormal market conditions, and this major flaw led to its downfall.
So, the price fluctuations incentivize burning activity, does works well as a control during low volatility periods, but when a large number of people wish to sell their UST, the price would fluctuate far further than the algorithmic controls were able to handle. While Kwon did plan for some of these with the addition of Anchor, an incentivized lending protocol used to further stabilize the platform, not even he could predict the events of May 2nd, 2022.
On May 2nd, there were numerous large withdrawals of UST from Curve.fi, which started a bank run on the token. Suddenly, everyone was trying to sell their UST, especially as it fell further and further from its $1 USD peg. Individuals wanted to get back what they could, even if they lost something.
Unfortunately, this started a death spiral that couldn’t be stopped, as there weren’t enough people burning UST to create the LUNA needed to anchor the blockchain. While LFG stepped in, selling Bitcoin to try to stabilize the blockchain, it wasn’t enough, and TerraLuna was basically defunct by May 16th, 2022.
Was Do Kwon Guilty?
At first glance, it appeared Kwon was doing the right thing. By the end of May 2022, he had launched Luna 2.0, which was a cryptocurrency NOT attached to the algorithmic stablecoin. He even airdropped some to all those holders affected by the crash.
It wasn’t enough, though. The world wasn’t going to forget the $40 billion they lost in the original crash, and the lawsuits against Kwon began to pile up until, in June 2022, it was announced his South Korean passport was on its way to being revoked. Not only that, but arrest warrants were issued for Kwon and five other individuals who were involved with Terraform Labs. Unfortunately, by the time Interpol arrived in Singapore to arrest him, Kwon was in the wind.
So, was he guilty? Did he knowingly encourage individuals to invest in a token he knew would crash? We can’t say for sure, but running when the heat started to intensify wasn’t a good look and doesn’t really scream “innocence” if you ask us.
Reportedly, he started his hiding in Serbia, which did not have an extradition treaty with South Korea. While we may never know where exactly he was hiding, he was caught in 2023 in Montenegro, attempting to travel to Dubai with forged documents. He had Costa Rican and Belgian passports on him at his arrest, both fake.
While he first had to face trial for the forged documents in Montenegro, he was eventually extradited to the United States in December 2024.
Do Kwon’s Prison Sentence
Kwon’s court proceedings in the United States began in the summer of 2025. He plead guilty to two different fraud charges, and agreed to pay over $19 million in restitution. During his sentencing hearing on December 11th, 2025, he was sentenced to 15 years in prison.
It was discovered during the course of the investigation that Kwon not only made shady deals to prop up the price of UST long before its crash, creating a fake sense of stability, but he also withdrew over $35 million in cash while on the run. We have no idea if this money was spent, or has been squirrelled away, but individuals all over the world say 15 years and $19 million isn’t enough.
Unfortunately for Kwon, after finishing his US prison sentence, he will be extradited to South Korea to face trial there. By then, he will no longer be a young man of 34, but approaching middle age, and it is likely he will face a prison sentence there as well.
