Crimes of Do Kwon: Freefall of South Korean crypto genius - fugitive life, forged passports and 15 years in jail

Do Kwon was sentenced earlier this month to 15 years in prison by a New York court for crimes associated with the fall of his cryptocurrencies TerraUSD and Luna. Kwon joins the hall of shame of crypto kings, queens and geniuses who were celebrated at the heyday of the digital currencies a decade ago, but manipulated their systems to defraud customers. Kwon was charged with money laundering and fraud, having been apprehended after a years-long manhunt. This is his story.

Do Kwon: the baby-faced crypto genius

Do Kwon, born in South Korea on 6 September 1991 as Kwon Do-hyung, went from software engineer to cryptocurrency entrepreneur after graduating from Stanford University with a degree in computer science. He cut his teeth at Microsoft and Apple before co-founding Singapore-based Terraform Labs with Daniel Shin in 2018, and serving as CEO.

Terraform Labs developed the Terra blockchain, the Luna cryptocurrency, and the algorithmic stablecoin TerraUSD (UST), which was marketed as maintaining a $1 peg through an automated mechanism involving Luna.
But before we move further, you need to know about the concept of stablecoins.

What are dollar-pegged stablecoins?

Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged as equal to, or 1:1 with, the US dollar or other fiat currencies.

The aim is to combine the benefits of crypto, such as fast and borderless transfers, with the stability of traditional money. The equal pegging to the dollar enabled stablecoins to be used in trading, remittances, and decentralised finance (DeFi) lending. Stablecoins were advertised as a “safe haven” during cryptocurrency volatility, something that Bitcoin, Ethereum, Dogecoin and others are notorious for.

There are three main types of dollar-pegged stablecoins.

The most common are fiat-collateralised cryptocurrencies. These dominate market capitalisation and are backed by 1:1 reserves of US dollars, usually in cash or treasuries held off-chain by a centralised issuer. Examples of such coins include Tether and USD Coin.

The second type are crypto-collateralised. These are over-collateralised, sometimes up to 200 per cent, by other cryptocurrencies locked in smart contracts. If the collateral value drops, positions can be liquidated to maintain the peg. Examples include DAI from MakerDAO, which is backed by Ethereum and other cryptocurrencies.

The third type are algorithmic stablecoins, which have minimal or no collateral. These use algorithms or incentives to adjust supply automatically through arbitrage operations, usually involving a more volatile “sister” tokens which absorbs price fluctuations. Fully decentralised, algorithmic stablecoins are the riskiest in volatile market conditions.

Do Kwon’s TerraUSD, or UST, was one such algorithmic stablecoin. It worked on what is known as a “burn-and-mint mechanism” using the sister coin Luna. In reality, UST was not actually backed by dollar reserves. In the ‘burn and mint operation’, when UST was down in value to US dollars, users would ‘burn’ UST and ‘mint’ more Luna coins, and when Luna was down, they would mint UST and burn Luna, and so on.

The massive fraud of Kwon

Kwon misled investors in his crypto assets about the stability and mechanics of TerraUSD, falsely claiming that the dollar peg was purely maintained by algorithms.

But the reality was different.

The dollar was “depegged” in May 2021, meaning UST temporarily lost its one-to-one value against the US dollar. But to hide this, Kwon secretly made arrangements with a trading firm to buy millions of dollars’ worth of UST to artificially restore the dollar peg.

This led to the inflation of Kwon’s cryptocurrency ecosystem, valued at $50 billion at its peak.

The spectacular collapse of TerraUSD and Luna and crypto winter

Crypto investments saw massive growth during the Covid pandemic. As the lockdowns eased, investments came down. In May 2022, Kwon’s crypto assets UST and Luna collapsed spectacularly, as a chain reaction of panic withdrawals contributed to the situation similar to run on the banks..

Nearly $40–50 billion in investor value was wiped out in days. Many retail investors lost their entire life savings.

The collapse highlighted algorithmic stablecoins’ vulnerability, a case of fake confidence without sufficient underlying mechanisms.

The fall of UST contributed to a broader crypto market crash known as “crypto winter”. It may have also partially caused the downfall of other firms like FTX, run by Sam Bankman-Fried.

Firms such as Three Arrows Capital, Voyager were also affected.

After the fall: Kwon’s life as a fugitive

After the 2022 collapse, Kwon disappeared. Reports claimed he fled first to Singapore, then to the Balkans, using false passports. But in March 2023, his escape from the law ended.
Kwon was arrested at Podgorica Airport in Montenegro while attempting to board a flight to Dubai using forged Costa Rican documents. He was given a short jail term in Montenegro for passport forgery.

Already, both the US and South Korea were on Kwon’s trail and wanted him extradited.

A legal battle ensued.

On 31 December 2024, Montenegro extradited Kwon to the US to stand trial at a federal court in Manhattan, New York. Kwon, the once-crypto king, pleaded guilty in August 2025 to conspiracy to defraud, wire fraud, and other related charges.
Nearly a year after his extradition, he was sentenced to 15 years in prison on December 11, with credit for time served in custody, including about 17 months in Montenegro.

Do Kwon: Epic fraud

The US judge described the TerraUSD fraud as “epic” and on a “generational scale”.

Kwon expressed remorse in court.

He and Terraform Labs had settled a separate civil case with the US securities watchdog, the SEC, for $4.55 billion, including an $80 million personal fine.

But his legal woes are not over.

The baby-faced entrepreneur may face additional charges in South Korea after serving his US sentence.