Do Kwon, who was behind two digital currencies that eventually collapsed in a $40 billion debacle, was sentenced to 15 years in prison on Thursday. During the sentencing, a judge referred to Kwon’s work at Terraform Labs as an “epic fraud” on a “generational scale” that few other previous frauds have reached.
South Korean entrepreneurs Daniel Shin and Do Kwon originally introduced the Terra blockchain as a platform for stablecoins tied to fiat currencies in 2018. It began with TerraKRW, pegged to the Korean won, but by 2020, the project shifted its focus to TerraUSD (UST), an algorithmic stablecoin designed to hold a $1 value backed by LUNA (the native cryptocurrency of the Terra blockchain) rather than traditional reserves. UST’s stability relied on an automated mechanism that tightened supply when the UST price went below $1 and expanded it when it went above $1.
A decentralized stablecoin has been viewed as a Holy Grail of sorts in crypto for many years; however, as illustrated by the eventual collapse of UST and the evolution of other projects, they are much more complex and can be difficult to scale while maintaining decentralization (if they work at all).
Since UST was effectively backed by LUNA collateral, the increased popularity of UST also led to a massive increase in the value of LUNA. LUNA’s value surged amid DeFi hype in 2021, drawing billions in capital. Terra’s ecosystem mostly gained traction through the Anchor protocol, a lending platform offering nearly 20% annual yields on UST deposits. By early 2022, UST had ballooned to a $10 billion market cap, ranking as the third-largest stablecoin behind USDT and USDC.
Unsurprisingly, the 20% annual yield on UST holdings ended up not being sustainable. Eventually, a sort of bank run ensued when the crypto market more generally experienced a downturn. LUNA was effectively hyperinflated to cover all of the users trying to flee UST, as the system as a whole fell apart. Like most failed schemes in crypto, UST’s remarkable returns made possible by the Anchor Protocol turned out to be an obfuscated Ponzi scheme of sorts.
The collapse erased $40 billion in value within a week, hitting retail depositors hardest as sophisticated players exited early. Do Kwon, the de facto face of the project, fled legal scrutiny, facing fraud charges in multiple countries that culminated in his 2023 arrest in Montenegro.
Notably, the collapse of UST and LUNA was part of a greater deleveraging event in crypto that eventually exposed other large players in the space, with infamous crypto exchange FTX being one of the final dominoes to fall in November 2022.
Tragic Stories from the Victims
During the hearing regarding Kwon’s sentencing in Manhattan federal court, victims of the Terra collapse laid bare the human wreckage from the $40 billion wipeout, according to reporting from Inner City Press.
Chauncey St. John, founder of the Angel Protocol for nonprofit giving, voiced pain for hundreds of organizations that built on Terra’s promise. His own $1 million loss gutted family retirement savings, while he scrambled to repay donors and halted aid projects, including solar installations in rural Africa. After Kwon’s infamous “steady lads” tweet amid the UST depeg from the $1 target, St. John sought guidance, only to hear advice too late to salvage anything. Despite the betrayal, he extended personal forgiveness, urging divine mercy for Kwon.
My name is Jake Collis. My loss is personal. I lost a dear friend. Do Kwon’s sentence will not solve it. He’s left hopeful blockchains fending for themselves. Four years ago I devoted myself to Terra Classic, to prevent further harm. I started a YouTube channel
— Inner City Press (@innercitypress) December 11, 2025
Another testimony included grief over a close friend’s suicide tied to the crash.
Stanislav Erofimthuk recounted a liquidation of savings for Kwon’s touted 20% safe yield, pouring in $190,000 just weeks before the spiral. Seventeen years of labor vanished, sparking divorce. “He destroyed my family,” Erofimthuk said flatly, pinning the ruin on assurances from Kwon’s X feed.
Finally, Tatiana Dontsova detailed her plunge from Moscow property owner to street-level despair. At 58 and alone, she cashed out an apartment for an $81,000 stake that dwindled to $13 amid the UST peg’s failure. Relocating to Tbilisi for a fresh start, she now faces homelessness and untreated illness, having sunk into three years of depression.
Dontsova: I sold my apartment in Moscow to invest with Do Kwon. I moved to Tbilisi. $81,000 turned into $13 in the palm of my hand. Kwon came up with Luna 2, calling it LUNC. He is not showing any responsibility for those who invested. I am now officially homeless
— Inner City Press (@innercitypress) December 11, 2025
Beyond these examples, Judge Paul Engelmayer received 315 letters from global investors: one lost $62,000 on a “low-risk” bet; another contemplated suicide after steering a father’s life savings into the void; parents confessed inability to feed children post-crash.
During sentencing, Kwon claimed that he truly believed in the promise of what he was building with Terra. Whether true or not, the destruction felt by those holding the bag when the system collapsed is the same.
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