Terraform Labs co-founder Do Kwon has petitioned a US federal judge to set his sentence at no more than five years in prison. In court filings, his lawyers argued that a longer term would be excessive, citing the time he has already spent in custody and the financial penalties he agreed to accept.
Under the plea deal, prosecutors previously agreed to seek up to 12 years in prison. The final sentence will be handed down in New York on December 11.
The lawyers submitted a formal request to Judge Paul Engelmayer on Wednesday. They contend that any demand beyond five years is far greater than necessary for justice.
The defense highlights that Kwon has effectively been detained for almost three years. He spent part of this time in Montenegro, where lawyers describe the conditions as brutal. The developer was detained there for using forged documents and spent four months in a local prison before being extradited to the US.
Context
The charges stem from the collapse of the Terra ecosystem in the spring of 2022. That event wiped about $40 B from the market, dealing a blow to numerous companies.
Prosecutors proved Kwon misled investors regarding the stability of the algorithmic stablecoin TerraUSD. When the asset lost its dollar peg in 2021, the founder claimed the Terra Protocol recovery algorithm had worked.
In reality, a high-frequency trading firm stabilized the price through secret token purchases at Kwon’s direction. Later in court, the businessman confirmed his statements were false and concealed the role of the market maker.
In August 2025, the entrepreneur pleaded guilty to two counts: wire fraud and conspiracy. As part of the agreement, Kwon committed to paying over $19 M and forfeiting several properties to the authorities.
Terraform Labs previously reached a $4.55 B settlement with the US Securities and Exchange Commission (SEC), in which Kwon’s personal fine amounted to $80 M. He was also banned from crypto transactions.
The US sentence will not mark the end of the developer’s legal troubles. A separate criminal case regarding the same events is underway against him in South Korea. Seoul prosecutors are seeking up to 40 years in prison. US authorities agreed not to block Kwon’s potential transfer to his home country after he serves half of the sentence imposed by the American court.
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