NEW YORK (AP) — Onetime cryptocurrency mogul Do Kwon was sentenced Thursday to fifteen years in jail after a $40 billion crash revealed his crypto ecosystem to be a fraud. Victims mentioned the 34-year-old monetary expertise whiz weaponized their belief to persuade them that the funding — secretly propped up by money infusions — was protected.
Kwon, a Stanford graduate recognized by some as “the cryptocurrency king,” apologized after listening as victims — one in court docket and others by phone — described the rip-off’s toll: wiping out nest eggs, depleting charities and wrecking lives. One advised the choose in a letter that he contemplated suicide after his father misplaced his retirement cash within the scheme.
Engelmayer mentioned at a daylong sentencing listening to in Manhattan federal court docket that the federal government’s advice of 12 years in jail was “unreasonably lenient” and that the protection’s request for 5 years was “totally unthinkable and wildly unreasonable.” Kwon confronted a most sentence of 25 years in jail.
“Your offense prompted actual individuals to lose $40 billion in actual cash, not some paper loss,” Engelmayer advised Kwon, who sat on the protection desk in a yellow jail go well with. The choose known as it “a fraud on an epic, generational scale” and mentioned Kwon had an “virtually mystical maintain” on buyers and prompted incalculable “human wreckage.”
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Greater than the mixed losses in FTX and OneCoin circumstances
Kwon pleaded responsible in August to fraud fees stemming from the collapse of Terraform Labs, the Singapore-based agency he co-founded in 2018. The loss exceeded the mixed losses from FTX founder Sam Bankman-Fried and OneCoin co-founder Karl Sebastian Greenwood’s frauds, prosecutors mentioned. Engelmayer estimated there could have been 1,000,000 victims.
Terraform Labs had touted its TerraUSD as a dependable “stablecoin” — a type of foreign money sometimes pegged to secure belongings to stop drastic fluctuations in costs. However prosecutors say it was an phantasm backed by exterior money infusions that got here crumbling down after it plunged far under its $1 peg. The crash devastated buyers in TerraUSD and its floating sister foreign money, Luna, triggering “a cascade of crises that swept by means of cryptocurrency markets.”
Kwon tried to rebuild Terraform Labs in Singapore earlier than fleeing to the Balkans on a false passport, prosecutors mentioned. He’s been locked up since his March 2023 arrest in Montenegro. He was credited for 17 months he spent in jail there earlier than being extradited to the U.S.
Kwon agreed to forfeit over $19 million as a part of his plea deal. His attorneys argued his conduct stemmed not from greed, however hubris and desperation. Engelmayer rejected his request to serve his sentence in his native South Korea, the place he additionally faces prosecution and the place his spouse and 4-year-old daughter dwell.
“I’ve spent virtually each waking second of the previous couple of years pondering of what I might have performed completely different and what I can do now to make issues proper,” Kwon advised Engelmayer. Listening to from victims, he mentioned, was “harrowing and jogged my memory once more of the good losses that I’ve prompted.”
Victims say losses ruined their lives, harmed charities
One sufferer, talking by phone, mentioned his spouse divorced him, his sons needed to skip school, and he needed to transfer again to Croatia to dwell along with his mother and father after TerraUSD’s crash evaporated his household’s life financial savings. One other mentioned he has to “dwell with the guilt” of persuading his in-laws and lots of of nonprofit organizations to speculate.
Stanislav Trofimchuk mentioned his household’s funding plummeted from $190,000 to $13,000 — “17 years of our life, gone” throughout what he described as “two weeks of sheer terror.”
Chauncey St. John, talking in court docket, mentioned some nonprofits he labored with misplaced greater than $2 million and a church group misplaced about $900,000. He and his spouse are saddled with debt and his in-laws have been pressured to work effectively previous their deliberate retirement, he mentioned.
However, St. John mentioned, he forgives Kwon and “I pray to God to have mercy on his soul.”
A prosecutor learn excerpts from a few of greater than 300 letters submitted by victims, together with an individual recognized solely by initials who misplaced practically $11,400 whereas juggling payments and making an attempt to finish school. Kwon had made Terra seem to be a protected place to stash financial savings, the particular person mentioned.
“To some that’s only a quantity on a web page, however to me it was years of effort,” the particular person wrote. “Watching it evaporate, actually in a single day, was some of the terrifying experiences of my life.”
“What occurred was not an accident. It was not a market occasion. It was deception,” the particular person added, imploring the choose to “contemplate the human price of this tragedy.”
Kwon created an “phantasm of resilience whereas overlaying up systemic failure,” Assistant U.S. Lawyer Sarah Mortazavi advised Engelmayer. “This was fraud executed with conceitedness, manipulation and complete disregard for individuals.”
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Related Press reporter Anthony Izaguirre contributed to this report.
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