• Do Kwon faces sentencing in New York, reviving focus on the TerraUSD collapse.
• Prosecutors seek 12 years; defense asks for five in the Terra fraud case.
• Kwon, Terraform settled with SEC, paying major fines over TerraUSD failures.

Do Kwon’s sentencing in New York on Thursday is set to become one of the most-watched moments in the global crypto sector, bringing the TerraUSD collapse back into public attention more than two years after the dramatic fall of the token.

The hearing, scheduled for 11 a.m. local time in Manhattan, as reported by Reuters, will determine how the courts respond to one of the most damaging events in digital asset history.

Kwon, the 34-year-old co-founder of Terraform Labs in Singapore, admitted to misleading investors about the behaviour of TerraUSD, which was marketed as a stablecoin designed to keep its value steady during periods of market volatility.

The token’s sharp breakdown, along with the linked Luna cryptocurrency, erased an estimated $40 billion and contributed to a wave of failures across the industry.

Market turmoil

The crash of TerraUSD in 2022 unfolded during a broader downturn that exposed vulnerabilities in multiple digital asset companies.

Kwon became one of several industry leaders charged after the sell-off triggered investigations into business practices linked to failed projects.

Prosecutors said, notes Reuters, the collapse of Terra caused billions in losses and intensified instability at a time when crypto markets were already under pressure.

TerraUSD had been positioned in 2021 as a stablecoin intended to stay at $1 regardless of market swings.

When the token slipped below the peg in May 2021, investors were told that its recovery came from an automated system called Terra Protocol.

Prosecutors said charging documents showed that the recovery was instead supported by a high-frequency trading firm that secretly purchased large amounts of TerraUSD to push its value back up.

Criminal case

Kwon was charged in January with nine counts, covering securities fraud, wire fraud, commodities fraud and money laundering conspiracy.

He later pleaded guilty to conspiracy to defraud and wire fraud, admitting to misleading investors about the factors behind TerraUSD’s return to its intended price.

As per Reuters, prosecutors have asked the court to impose a sentence of at least 12 years, arguing that the consequences of the Terra collapse contributed to widespread market disruption.

Kwon’s legal team has requested that the sentence be limited to five years so that he can serve time in the United States and then return to South Korea, where he faces additional criminal charges.

His case forms part of a broader series of actions by authorities seeking to clarify how companies communicate the risks of complex crypto assets.

Civil settlement

The sentencing follows a major civil settlement agreed in 2024 between Kwon, Terraform Labs and the US Securities and Exchange Commission.

Under that arrangement, Kwon must pay an $80 million civil fine and is barred from engaging in crypto transactions, while the companies involved accepted a wider penalty totalling $4.55 billion.

The settlement formed a central part of regulators’ efforts to address the issues raised by Terra’s collapse and the communication practices surrounding it.

Kwon’s situation also includes a cross-border dimension, as South Korea continues its separate legal proceedings.

Prosecutors in the United States said they would not oppose a request for transfer after Kwon completes half of his US sentence, a measure built into the plea agreement, according to Reuters.

With the hearing set for 1600 GMT, policymakers, investors and market analysts are paying close attention to how the sentence may influence future enforcement in digital finance and other investigations linked to failed crypto products.

The post Do Kwon faces sentencing in New York as TerraUSD collapse returns to spotlight appeared first on CoinJournal.

US federal prosecutors have charged a 26-year-old Canadian citizen in connection with a $42 million fraud scheme, claiming to raise funds for investments in crypto, TradFi markets.

Nathan Gauvin lured individuals on the social media platform Discord, directing investors to put their money into Gray Digital Capital Management Inc. and its Gray Fund products.

Multi-Million Dollar Scheme Targets Investors on Discord

According to the indictment announced by the U.S. District Court for the Eastern District of New York, Gauvin gave false information to a fintech firm to secure $800,000 in credit. He then used the funds to pay for personal expenses, including for a private club in London.

“In total, Gauvin fraudulently raised more than $42 million from Gray Digital investors and obtained more than $800,000 in credit from lenders,” an SEC announcement read.

Per the prosecutors, the defendant used most of the money to pay previous investors, buy luxury goods and pay his credit card bills.

“Gauvin exploited the trust of his online followers to perpetrate a brazen fraud,” said Jaime Marinaro, Associate Director of the SEC’s Fort Worth Regional Office.

Authorities arrested Gauvin in England on Wednesday on a provisional arrest warrant. The US SEC has also filed for securities fraud charges. The regulator noted that the accused continued to submit false documents to the SEC during regulatory investigations.

Further, the Federal Bureau of Investigation separately released a statement, seeking to identify potential victims of the fraud. “Victims may be eligible for certain services, restitution, and rights under federal and/or state law,” the FBI said.

Crypto Fraud That Ran For Over 2 Years

The indictment said that from May 2022 to October 2024, Gauvin and others enticed investors to put money into Gray Digital and Gray Fund. Among the companies, the flagship fund purported to offer investors a strategy “that blends TradFi (traditional finance) and DeFi (decentralized finance).”

The defendant allegedly misrepresented Gray Digital’s performance by providing falsified documents to investors.

He also claimed that the Gray Fund generated double-digit monthly returns and held over $78 million in assets. However, in reality, the fund had a monthly compounded return of approximately 1.4% and assets were far lower than claimed.

Later, there was a second scheme that started in May 2024, which touted a “seed stock” offering in Gray Digital at $30,000 per share. At the time, Gauvin said the company had a $60 million valuation and more than $12 million in annual revenue.

The SEC has sought disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and conduct-based injunctions against Nathan Gauvin.

“Investors should always verify the credentials of anyone offering investment opportunities, especially when those opportunities are promoted through social media or online communities,” SEC’s Marinaro warned.

The post Canadian Man Charged for Orchestrating $42M Crypto Fraud Scheme Luring Users on Discord appeared first on Cryptonews.

US District Judge Paul Engelmayer has asked prosecutors and defense lawyers for detailed clarification on a series of unresolved issues ahead of Terraform Labs co-founder Do Kwon’s sentencing.

This includes the possibility of the crypto entrepreneur facing an additional 40-year prison term in South Korea after serving time in the United States.

The judge issued the order on December 8, laying out multiple questions that he wants answered before the December 11 hearing.

The filing shows that the court is weighing how Kwon’s foreign legal exposure, previous detention, and the mechanics of international prisoner transfer programs may affect the punishment imposed in New York.

Court Seeks Clarity on Kwon’s Potential 40-Year Korean Prison Term

The judge’s first set of questions focuses on South Korea’s ongoing criminal case against Kwon.

He asked both parties whether they have any reliable information about the likely outcome of the charges he faces there, whether any agreements have been made with Korean authorities, and what sentencing ranges apply if he is convicted.

South Korean prosecutors previously said they would seek up to 40 years in prison for the same conduct that forms the basis of the US case.

The court also asked whether a Korean sentence could run concurrently or consecutively with a US sentence, a detail that could influence the final terms.

The order also seeks clarification on how to treat the nearly two years Kwon spent in custody in Montenegro. He was arrested in March 2023 while traveling under a false passport and remained detained until extradition.

The judge wants to know whether the Bureau of Prisons will credit any portion of that 21-month period toward his US term and whether the government’s recommendation of a 12-year sentence was based on the assumption that none of that time will count.

Federal prosecutors have already urged the court to impose the full 12 years permitted under Kwon’s plea agreement.

Defense Pushes Back as Prosecutors Call TerraUSD Collapse “Colossal”

They described the TerraUSD collapse as “colossal in scope,” citing the broader market chain reaction that contributed to the downfall of major firms, including Sam Bankman-Fried’s FTX.

Kwon pleaded guilty in August to conspiracy and wire fraud, admitting that he made false statements about TerraUSD’s stability mechanisms and concealed Jump Trading’s role in supporting the stablecoin during a 2021 depeg event.

Kwon’s lawyers have asked for a five-year term instead, arguing that the time he spent in Montenegro was served in “brutal conditions” and should weigh heavily in the court’s decision.

They also point to the likelihood that he will be extradited to South Korea after completing his US sentence, where he faces a much longer potential punishment.

The defense says that imposing the full recommended term would result in an excessively long combined period of imprisonment.

Judge Seeks DOJ Clarification on Victim Compensation and Asset Forfeiture

The judge’s order shows he is taking that possibility seriously. He asked both sides to explain whether supervised release would even matter if Kwon is likely to be removed from the United States.

He also questioned what guarantees the U.S. would have that another country would enforce the rest of Kwon’s sentence if he is transferred overseas.

Prosecutors have already said they will support a transfer request once Kwon serves half of his sentence.

But the judge noted that these transfers usually require detailed recommendations to the Bureau of Prisons before they can move forward.

The filing also points to several administrative problems tied to forfeiture and victim payments.

The judge asked the Justice Department to clarify how its remission process would decide which victims qualify for compensation from the seized assets.

This question is especially important because the losses span multiple countries, and no restitution order was requested in the case.

The post Do Kwon Sentencing: Judge Demands Clarity on Looming 40-Year South Korea Prison Term appeared first on Cryptonews.