Do Kwon, former DeFi star, is now at the center of an unprecedented judicial scandal. Less than two years after the collapse of Terra-Luna, which swallowed $40 billion, he is trying to avoid a heavy sentence in the United States. His goal is to convince the court to limit his sentence to five years in prison. Two weeks before his hearing, this request reignites debates about the responsibility of crypto founders in the face of the devastating consequences of their projects.
In a 23-page legal document filed on November 26 before the federal court in New York, Do Kwon’s lawyers plead for a maximum sentence of five years’ incarceration.
This request comes after he pleaded guilty in August to two counts of fraud related to the collapse of the Terra-Luna ecosystem, which caused about $40 billion in losses. The defense’s goal is to demonstrate that the overall circumstances justify a sentence much lower than the twelve years considered by the prosecution.
As the letter indicates : “the government’s proposal […] does not take into account all the circumstances that would justify a sentence not exceeding five years”.
Among the arguments put forward by the defense to justify this clemency are :
This request comes as the sentence is expected on December 11.
Do Kwon’s defense did not limit itself to technical or economic considerations. It also emphasizes the particularly harsh detention conditions the Terraform Labs founder has endured since his arrest in Montenegro in March 2023.
Imprisoned for the use of forged travel documents, he spent nearly two years in detention there, part of it in solitary confinement. His lawyers argue that this deprivation of liberty, already endured prior to the U.S. trial, should be considered a significant mitigating factor in the final sentence. “Do has already suffered considerably due to his actions,” the letter notes, referring both to legal and personal consequences.
Furthermore, the collapse of the Terra-Luna ecosystem is not solely attributable to Kwon’s management. The lawyers cite coordinated market attacks carried out by third-party entities exploiting the weaknesses of the UST algorithm.
To support their claims, they rely on academic studies and reports that offer a more nuanced view of the technical and structural responsibilities for the disaster. This strategy aims to show that Kwon, although having committed serious faults, was not the sole driver of the crash.
The verdict expected in the Terra Luna case will mark a turning point for crypto justice. Whatever the sentence, it will set a precedent in how courts handle the responsibility of founders regarding abuses and the consequences of such a massive collapse.
