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- Terraform Labs co-founder Do Kwon may face a second criminal trial in South Korea.
- Korean prosecutors seek over 30 years tied to massive Terra investor losses.
- US permits possible transfer after half the sentence, keeping the Korean case active.
Terraform Labs co-founder Do Kwon faces renewed legal risk as South Korean prosecutors prepare for a potential domestic trial. The development follows his 15-year prison sentence issued by a Manhattan federal court, according to The Korea Times. Authorities say the scale of harm from the Terra collapse warrants further prosecution. The case underscores expanding global enforcement against crypto-related fraud.
A US District Court sentenced Kwon last week for orchestrating the $40 billion collapse of TerraUSD. Judge Paul Engelmayer rejected the prosecution’s 12-year recommendation. He also dismissed the defense request for a five-year term. The court imposed a 15-year sentence, calling it the minimum punishment allowed under the law.
In sentencing, a direct rebuke was issued by Judge Engelmayer. He explained to Kwon that there were not many cases of fraud at the federal level that resulted in similar losses. Kwon was convicted of nine counts of fraud and money laundering by the court. It also directed the seizure of $19 million of unlawful profits associated with the scheme.
South Korea Keeps Legal Path Open for Do Kwon
South Korean officials have acted simultaneously. In September 2022, prosecutors declared an arrest warrant in the joint financial crimes unit of the Seoul Southern District Prosecutors. They claim that the Korean courts still have the power to prosecute. According to the officials, domestic punishment is not prohibited by foreign convictions.
Kwon could request a transfer to South Korea after serving half of his US sentence. The prosecutors there are seeking a sentence of over 30 years. The accusations focus on the breach of the Capital Markets Act and the US conviction.
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A senior prosecutor opined that domestic prosecution would work most beneficially for local victims. Officials estimate that 200,000 Korean investors lost their money. The amount of total damage is 300 billion won ($204 million). Prosecutors consider a Korean trial to be part of the restoration and responsibility of investors.
Terraform Labs Trials Advance
South Korea has already progressed in legal proceedings. More than ten suspected accomplices related to Terraform Labs have been charged with almost three years of trial. Meanwhile, authorities kept those cases pending the return of Kwon. Prosecutors argue that the case of Korea does not depend on the US action.
In March 2023, Kwon was arrested in Montenegro due to the unlawfulness of possessing forged documents. He tried at first to get extradited to South Korea instead of the United States. He spent nearly two years in Montenegrin custody. In December 2024, he was moved to the US, and his defense later claimed that the conditions of detention were brutal.
Kwon pleaded guilty in US court to falsely leading investors who had invested in the company in 2018-2022. Terraform Labs marketed TerraUSD and its sister asset, Luna. The company said that the system kept the one-to-one dollar peg by designing a protocol. Such assertions led to investor confidence in the Terra ecosystem.
TerraUSD Failure Sets Stage for Harsh Sentencing
In May 2021, TerraUSD fell below $1, and Kwon stated publicly that the protocol had put the peg back on its own. This system finally collapsed in 2022. The collapse led to one of the biggest crypto losses ever. The structure collapsed, and confidence in the market faded away.
US sentencing policies originally indicated a maximum of a 130-year sentence. In August, prosecutors advised a 12-year cap on a plea agreement. Both extremes were rejected by Judge Engelmayer. He rejected claims that the potential prosecution in Korea should shorten the US term, saying that a court cannot conjecture over foreign determinations.
US prosecutors subsequently indicated that they would not oppose a transfer request provided that Kwon serves half of his term. That position leaves the way open to South Korea. The Terraform case takes another legal turn.
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