New York (AFP) – A US court sentenced cryptocurrency tycoon Do Kwon to 15 years in prison Thursday over fraud linked to his company’s failure, which wiped out $40 billion of investors’ money and shook global crypto markets. Kwon, who nurtured two digital currencies central to the bankruptcy, was sentenced at the New York court where he pleaded guilty in August after an international manhunt spanning Asia and Europe. He still faces fraud charges in his native South Korea.
The 34-year-old’s Terraform Labs created a cryptocurrency called TerraUSD that was marketed as a “stablecoin,” a token that is pegged to stable assets such as the US dollar to prevent drastic fluctuations. Kwon successfully marketed them as the next big thing in crypto, attracting billions in investments and global hype. He was flooded with praise in South Korean media, which described him as a “genius” as thousands of private investors lined up to pour cash into his company.
And in 2019, Kwon featured in Forbes magazine’s 30 under 30 Asia list. But despite billions in investments, TerraUSD and its sister token Luna went into a death spiral in May 2022. Experts said Kwon had set up a glorified pyramid scheme, in which many investors lost their life savings. He left South Korea before the crash and spent months on the run. The crypto tycoon was arrested in March 2023 at the airport in Podgorica, the Montenegrin capital, while preparing to board a flight to Dubai, in possession of a fake Costa Rican passport. He was extradited last year from Montenegro to the United States.
– ‘Elaborate schemes’ –
After Kwon’s sentencing Thursday, US prosecutors detailed how he made fraudulent claims about his business to lure in buyers, including American investment firms. At its peak in the spring of 2022, the total market value of TerraUSD and Luna exceeded $50 billion. “Do Kwon devised elaborate schemes to mislead investors and inflate the value of Terraform’s cryptocurrencies for his own benefit,” US Attorney Jay Clayton said in a statement.
When it all came crashing down, Clayton’s office said in a press release, Kwon sought to obtain “political protection” from several countries. It cited a recorded conversation in which he told an associate that his strategy of dealing with authorities investigating the collapse was to “tell them to fuck off.” Alongside his prison term, Kwon was ordered to forfeit over $19 million in proceeds from his illegal schemes. The US Justice Department said in a court filing that he could be allowed to complete his sentence in South Korea, provided at least half of it is served in the United States.
Cryptocurrencies have come under increasing scrutiny from regulators after a string of controversies in recent years, including the high-profile collapses of exchanges. Kwon’s impressive rise and precipitous fall has been compared to convicted American fraudster Elizabeth Holmes, the disgraced founder of the medical technology startup Theranos.
© 2024 AFP
