The U.S. District Court for the Southern District of New York recently received a blockbuster sentencing recommendation—the prosecution is seeking a 12-year prison term for Terraform Labs co-founder Do Kwon. That may sound like a hefty sentence, but considering the scale of the disaster he caused, it’s actually rather lenient.

The story dates back to the epic collapse of 2022. In May of that year, the algorithmic stablecoin TerraUSD (UST), which claimed to be pegged 1:1 with the US dollar, and its sister token Luna, both spiraled into a death spiral within just a few days. Investors worldwide watched as roughly $40 billion evaporated—a scale that ranks among the top three collapses in crypto history.

The prosecutors’ accusations are straightforward: Do Kwon artificially inflated the price of Terra ecosystem tokens through exaggerated marketing and market manipulation. The problem was that UST’s “algorithmic stability” mechanism was inherently fragile. Once cracks appeared in its interlocking system with Luna, the whole structure collapsed instantly. In hindsight, the so-called “innovative mechanism” looks more like a carefully crafted scam.

What does a 12-year sentence mean in this context? Compared to the scale of the losses, it’s actually quite restrained. After all, hundreds of thousands of investors lost their hard-earned savings, with some even going bankrupt as a result. This case serves as a wake-up call for the entire industry: no matter how flashy the concept, if the underlying logic doesn’t hold up, it’s only a matter of time before disaster strikes.