Do Kwon, the founder of Terraform Labs, has requested that a U.S. court limit his prison sentence to five years after pleading guilty to charges related to the $40 billion collapse of the Terra-Luna cryptocurrencies. His legal team submitted a 23-page letter on November 26, 2025, to the U.S. District Court for the Southern District of New York, arguing that a sentence of up to five years would be sufficient.
The letter, filed by Kwon’s attorneys, asserts that while the U.S. government has proposed a 12-year sentence, it does not take into account certain mitigating factors. They argue that Kwon’s actions were not driven by personal greed but rather by the hubris and desperation of a young entrepreneur facing pressures he could not manage. The defense team emphasizes that Kwon’s conduct stemmed from errors made in the early stages of his company, rather than from malicious intent.
Kwon’s legal team also pointed to his nearly two-year detention in Montenegro, including time spent in solitary confinement after his arrest in March 2023. He had been apprehended for using a fake passport and was later extradited to the U.S. in December 2024. They believe that this extended period of hardship, combined with the ongoing legal battles in South Korea, where he faces an additional 40 years in prison, is already a severe consequence for his actions.
Legal Arguments and Plea Details
Kwon pleaded guilty to two fraud-related charges in August 2025, stemming from the May 2022 collapse of Terraform Labs’ Terra ecosystem, which included the algorithmic stablecoin TerraUSD and its sister cryptocurrency Luna. His failure to disclose a secret agreement with Jump Trading to maintain the peg of TerraUSD in May 2021 is a central aspect of the charges. The collapse was further exacerbated by coordinated trades from third-party firms exploiting vulnerabilities within the system, according to academic research and Chainalysis reports.
The defense also noted that Kwon regrets his actions, acknowledging that the misleading information he provided to investors had disastrous consequences. The letter argues that while his conduct was reckless, the impact on others was not intentional and was influenced by a series of misjudgments under significant pressure.
Kwon’s legal team continues to maintain that he has already suffered greatly due to his involvement in the collapse of Terra-Luna, highlighting his time in detention and the toll of the ongoing legal proceedings in multiple jurisdictions.