Do Kwon Seeks Leniency: Terra-Luna Founder Pleads for Maximum 5-Year Sentence After Admitting Guilt in $40 Billion Crypto Collapse

In a dramatic development following the catastrophic 2022 Terra-Luna collapse, an event that wiped out an estimated $40 billion for global investors, Terraform Labs founder Do Kwon has formally submitted a 23-page plea letter to a U.S. court. Having admitted guilt to specific charges in August, Kwon is now appealing for a significantly reduced sentence, requesting a maximum of five years behind bars.

The extensive letter, filed on November 26 with the U.S. District Court for the Southern District of New York, argues that while prosecutors have proposed a 12-year maximum sentence, their assessment fails to fully account for all mitigating circumstances that support a term “not exceeding five years.”

Admissions and Allegations: The Road to Leniency

Do Kwon had previously admitted guilt to two fraud charges related to the Terra ecosystem’s implosion to the U.S. Department of Justice in August. The crisis began in May 2022 with the dramatic de-pegging and subsequent collapse of Terraform Labs’ algorithmic stablecoin, TerraUSD (UST), and its companion token, LUNA. This event sent shockwaves through the cryptocurrency market, prompting widespread regulatory scrutiny and intervention globally.

Kwon’s defense team asserts in the letter that his criminal actions were not driven by “personal enrichment or a desire for quick wealth.” Instead, they contend his missteps originated from youthful arrogance and, later, the overwhelming despair of a young founder making grave errors under immense pressure he was ill-equipped to handle.

Further bolstering their argument, the defense cited academic papers and a report from leading blockchain analytics firm Chainalysis. These documents suggest that the UST collapse was, in part, orchestrated by “third-party companies through organized, coordinated trading activities exploiting vulnerabilities” within the system.

Crucially, Do Kwon also acknowledged his failure to publicly disclose a pivotal “secret agreement.” This 2021 pact with trading firm Jump Trading involved covert interventions to maintain UST’s price peg. Kwon now expresses regret over this omission, recognizing it as a significant factor that led investors to misjudge the true risks involved.

Pre-Extradition Ordeal and Future Challenges

The legal team also underscored the considerable hardship Do Kwon has endured prior to his extradition. Since his arrest in Montenegro in March 2023 on charges of using a fake passport, he has spent nearly two years in detention, including periods of solitary confinement. He is slated for extradition to the U.S. for trial in December 2024.

Adding to his legal woes, Do Kwon faces identical charges in South Korea, where prosecutors are reportedly seeking an astonishing sentence of up to 40 years. The plea letter poignantly states:

Do Kwon has paid a huge price for his actions. Regardless of the verdict… he will face more suffering in the future.

While this article details Do Kwon’s recent admission of guilt for specific fraud charges, it’s worth noting earlier reports indicated a more defiant stance. For instance, in an initial U.S. court appearance, he was reportedly charged with 9 counts and faced a potential 130-year prison sentence, with reports stating he “adamantly pleaded not guilty.” This highlights the evolving nature of legal proceedings in such complex cases.

Do Kwon’s sentencing hearing is currently scheduled for December 11.