NEW YORK — A South Korean former crypto entrepreneur has been sentenced to 15 years in prison for orchestrating one of the most significant frauds in the cryptocurrency sector, which contributed to the loss of approximately $40 billion. Do Kwon, co-founder of Terraform Labs, was found guilty of misleading investors regarding the viability of the digital currencies TerraUSD and Luna.

Kwon’s legal troubles stem from the collapse of TerraUSD, a stablecoin designed to maintain a dollar-equivalent value. In court, he admitted to deceiving investors about the stability and security of the asset, particularly during its dramatic decline in May 2021. At that time, he assured investors that a computer algorithm would manage to restore its value, despite knowing that was not the case.

U.S. District Judge Paul A. Engelmayer condemned Kwon’s actions as “an epic, generational” fraud that harmed countless investors who entrusted him with their money. During the Thursday hearing in Manhattan, the judge remarked on the unprecedented scale of the deception. “In the history of federal prosecutions, there are few frauds that have caused as much harm as you have,” Engelmayer stated.

Following his guilty plea in August to charges including conspiracy to defraud and wire fraud, Kwon expressed his remorse in court. He stated that he has spent significant time reflecting on his actions and considering alternative paths he could have taken. “I have spent almost every waking moment of the last few years thinking of what I could have done differently and what I can do now to make things right,” he told the court.

Prosecutors revealed details about Kwon’s deceptive practices, highlighting that when TerraUSD fell below its intended price, he directed a trading firm to purchase millions of dollars’ worth of the coin. This tactic was intended to artificially inflate its value, masking the instability of the asset and misleading investors further.

Kwon’s case is emblematic of broader challenges facing the cryptocurrency industry following a turbulent year in 2022, which saw significant declines in the value of many digital currencies and the collapse of several high-profile firms. Regulators have ramped up scrutiny in efforts to hold accountable those who exploit investor trust in this rapidly evolving and often volatile sector.

The repercussions of Kwon’s actions extend far beyond legal penalties, as they have shaken investor confidence in cryptocurrency markets. As authorities continue to examine fraud cases within the industry, many are calling for stronger regulations to prevent similar situations in the future.

Kwon’s sentencing marks a pivotal moment in the ongoing narrative of cryptocurrency regulation and accountability. The severity of his punishment serves as a warning to others in the sector about the legal and financial ramifications of fraudulent behavior.