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Crypto entrepreneur Do Kwon received a 15-year prison sentence on December 11 after he pleaded guilty to fraud relating to the $40 billion crash of his TerraUSD and Luna coins in 2022.
South Korean-born Do Kwon founded blockchain company Terraform Labs in 2018. The company was worth $50 billion at its height, but Kwon’s misrepresentation of its instability cost billions in market value for investors around the world.
In August Kwon pleaded guilty to one count of wire fraud and another on conspiracy to commit wire, securities, and commodities fraud. Prosecutors said the founder was “driven by greed and arrogance” and “had lied repeatedly about the efficacy and safety of his products.” On the other side, the defense tried to claim he simply wanted to “build useful technology” but “succumbed to the ‘fake it until you make it’ mentality,” as reported by the Wall Street Journal
Kwon was “among the loudest and most influential cheerleaders for digital currencies” during the crypto boom in 2021 and 2022 and hailed his cryptocurrency “the future of money” according to the WSJ. His reign plummeted when his cryptocurrencies TerraUSD—which was meant to remain at a value of $1—and Luna both crashed catastrophically. TerraUSD slipped below $1, which caused overproduction of Luna and the decline in its price to nearly $0.
Kwon maintained his system’s algorithm was keeping UST at a stable $1, but in reality Jump Trading bought a significant amount of the stablecoin to prop it up in 2021. The deception enabled a continued flow of money from investors.
But the fix was temporary and UST slipped again, revealing its underlying fragility.
Over 300 letters from victims were read in court, detailing the consequences of the fraud. One said in a letter to the judge that he contemplated suicide when the scam cost his father his retirement money. Another said he lost so much of his family’s savings that his kids couldn’t attend college and his wife filed for divorce.
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Ava Levinson
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