Do Kwon asked a U.S. judge to limit his sentence to five years, while South Korean charges carry up to 40 years.

Legal situation

He has appealed in the United States for a shorter prison term, citing factors he considers mitigating in his defense strategy.

At the same time, prosecutors in South Korea pursue separate criminal charges related to the collapse of the Terra ecosystem and associated losses.

How Terra worked

Terra relied on an algorithmic pairing between $UST and $LUNA, enabling swaps to maintain the stablecoin peg to one dollar.

The mechanism depended on market trust and automatic LUNA issuance when the peg underperformed, rather than on fully collateralized reserves.

Anchor and the collapse

The protocol Anchor promised about 19–20% yields on $UST, which critics later identified as a key vulnerability in the system design.

In May 2022, large withdrawals disrupted the peg, triggering massive conversions of $UST into $LUNA, an enormous increase in LUNA supply, and a precipitous price decline.

The resulting destruction of value affected numerous holders and wiped out billions in market capitalization across the ecosystem.

Lessons and implications

The collapse illustrated risks inherent to algorithmic stablecoins without transparent external reserves and sustainable yield sources.

Market participants and regulators cite the case as an example of how design choices and promised returns can amplify systemic vulnerabilities.

Practical advice

Investors are advised to avoid relying solely on high-yield claims and to diversify holdings across assets with clear reserve backing.