Kwon Don't
Terraform Labs founder Do Kwon never planned on failure. Now he's headed to prison after pleading guilty to a $40 billion crypto fraud.
“The difference between stupidity and genius is that genius has its limits.” – Albert Einstein
Most of us weren’t brainy enough to get into Stanford University or work at Apple and Microsoft as cutting-edge software engineers, but we learned as early as kindergarten to consider consequences.
Not Terraform Labs founder Do Kwon.
“I’ve never thought about what could happen to me if this fails,” the 33-year-old wunderkind said in an August 2022 interview.
Kwon pleaded guilty on Tuesday to a fraud that sacked his investors with $40 billion in losses and triggered a massive downturn in global crypto market when his funny-money empire imploded in May 2022.
Prosecutors called it one of the largest financial frauds in all of history.
So now, here’s what’s going to happen: Kwon will be sentenced to prison on Dec. 11.
The charge carries a maximum of 25 years, but prosecutors will reportedly ask for not more than 12 years in exchange for his guilty plea. It’s a good deal considering he could have faced 130 years. It’s a good deal considering that crypto klepto Sam Bankman-Fried got 25 years.
Somehow, though, Kwon never even thought of the 12 years he could get if his dicey scheme blew. Nor did he fathom losing a $4.5 billion civil verdict in a case brought by the Securities and Exchange Commission.
At the top of his game, Kwon was a trash-talking troll. He mocked his social media critics as “idiots” and haughtily told one of them: “I don’t debate the poor on Twitter.”
Read More: Sorry Seems To Be The Hardest Word (Business Blunders)
What’s remarkable, though, was how he was able to sucker so many people out of so many billions, even as smarter people challenged his business model online.
In an age of crypto hype and astonishing overconfidence, venture capitalists lavished Kwon with loot. Firms – including Arrington Capital, Coinbase Ventures, Galaxy Digital, and Lightspeed Venture Partners – fell all over themselves in fear of missing out on a new buzzword, DeFi or Decentralized Finance.
The financial media worshiped this guy, too. Forbes, for one, lauded Kwon on its “2019 30 Under 30” list like he was going to be something besides a digital-age crook.
Somehow, Kwon’s blockhead blockchain idea sounded good. Here’s how it went:
Kwon founded Terraform in 2018 and launched two cryptocurrencies: TerraUSD and Luna.
TerraUSD was designed to be a stablecoin – pegged to the U.S. dollar through an algorithm. TerraUSD had zero assets backing it, but buyers were assured that they could always exchange one TerraUSD for one Luna.
This is like promising your baseball card will always be worth one Pez dispenser, but crypto traders loved Terraform’s Anchor Protocol, a crypto bank that offered yields as high as 20% on TerraUSD deposits.
Like that was going to happen.
So after Kwon’s crypto crap swiftly settled in its crypto crypt, Kwon decided to disappear.
He was finally caught in Montenegro boarding a private jet with a fake Costa Rican passport. He claimed he was hiding from his ruined investors.
Yeah, that’s one of the other things that happen when you take billions of dollars and fail – especially when you dupe powerful investment firms. They come to get you.
They ought to teach that at Stanford.
Sorry, not sorry
“I made false and misleading statements,” Kwon said in court on Tuesday. “What I did was wrong.”
But this 2022 interview by a former Forbes editor reveals all you need to know about Kwon’s level of remorse. Roughly 20 minutes into this video, he has to be prompted for an apology to all he people he ruined.
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