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Newsletter: Terra’s Do Kwon gets 15 years, crypto banks get the green light, and the Trump family’s crypto grift expands even as one of their treasury companies goes off the rails

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Issue 98 – The world’s most corrupt crypto startup operation

Molly White (Citation Needed)
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Molly White
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Molly White
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Following hundreds of victim impact statements from people describing how their lives were ruined in the $40 billion Terra implosion in 2022, Do Kwon has been sentenced to fifteen years in prison. He may also serve additional time if sentenced in his home country of South Korea.

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In the courts Do Kwon Do Kwon, founder of the collapsed Terra/Luna project, has been sentenced to fifteen years in prison — three more than the twelve years sought by prosecutors1a and well above the five requested by his defense.2 Judge Paul Engelmayer said the upward variance reflected the scale of Kwon’s fraud — both monetarily and in its more than one million victims — and Kwon’s decision to flee [I4], remaining at large for months before he was caught in Montenegro attempting to travel to Dubai on a fake passport [I23]. The disparity from fellow crypto fraudster Sam Bankman‑Fried’s 25‑year term likely stems from Kwon’s decision to plead guilty to two wire‑fraud counts, securing a deal in which prosecutors dropped seven other charges, rather than take the case to trial.
Kwon’s Terra project unraveled in May 2022 in a $40 billion crash after the algorithmic stablecoin lost its dollar peg and ultimately went to zero. Investors drawn by supposedly “risk‑free” yields for holding “dollars” learned that Terra (UST) was not a dollar, and that the yields were anything but risk‑free. One victim who spoke at Kwon’s sentencing, a Russian woman living in the country of Georgia, explained that she had been living on the streets after her “$81,000 turned into $13 that I could hold in the palm of my hand.” Other victims described suicides of friends who had invested in Terra, their own thoughts of ending their lives, families breaking up, postponed retirements and schooling, the inability to pay medical bills, and lives ruined.3 I purchased the PACER documents so that anyone can read the victim impact statements for themselves, and highlighted some of them.
Kwon, a South Korean national, also faces charges at home. Before sentencing, Judge Engelmayer asked about likely outcomes there, including the likely sentence length if he is convicted and whether it would run concurrently with any US sentence. Prosecutors reported they had limited insight but noted that Korean sentencing could range from six years to indefinite; however, Korea has never imposed indefinite terms for fraud offenses, sentences of 30 or more years are rare, and courts frequently depart below prosecutorial recommendations. They also noted that any sentence imposed in Korea would be reduced by the amount of time he serves in the US.4 Engelmeyer ultimately included a requirement that Kwon serve at least half of his fifteen-year sentence in the US before he can apply for a transfer to South Korea.5
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Molly White
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Molly White
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The OCC has approved the first five national trust bank applications by crypto firms Circle, Ripple, BitGo, Fidelity Digital Assets, and Paxos. This gives them a stronger foothold in traditional finance, confers regulatory legitimacy, and preempts some state financial laws.

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Office of the Comptroller of the Currency The Office of the Comptroller of the Currency has conditionally approved the first spate of national bank trust charter applications from five crypto companies: Circle (using an entity called First National Digital Currency Bank), Ripple, BitGo, Fidelity Digital Assets, and Paxos [I88, 95].11 These licenses don’t permit the firms to accept cash deposits or make loans, but they will allow them to hold customer assets. The approvals prompted objections from several banking groups, including the National Community Reinvestment Coalition, which wrote that “Today’s OCC announcement sends a dangerous message to the financial industry: break the law, harm consumers, and facilitate fraud—and you will be rewarded with a bank charter. ... Granting these cryptocurrency charters creates a new and frightful category of banks-in-name-only ... It will further enrich insiders in the crypto industry at the expense of the rest of us.”12
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Molly White
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Molly White
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Ondo Finance has announced the SEC has ended a multi-year investigation into their activities. This follows Ondo’s $2 million+ in political contributions to President Trump, hiring of former Congressman Patrick McHenry, and partnership with Trump’s World Liberty Financial.

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SEC The SEC has reportedly ended a two-year-long investigation into Ondo Finance and its tokenization of US Treasuries. In December 2024 and February 2025, the Trump family’s World Liberty Financial crypto business gave Ondo $720,000 to acquire almost 135,000 ONDO tokens for its treasury.1415 In January and February, Ondo Finance contributed $2.1 million to the pro-Trump super PAC MAGA Inc.16 In February, former House Financial Services chair Patrick McHenry joined Ondo as vice chairman of its advisory board [I78]. Also in February, Ondo announced a partnership with the Trump family’s World Liberty Financial crypto business, which was reportedly looking to incorporate into its crypto platform the same Ondo products that drew SEC scrutiny.17 According to Ondo, the SEC closed its investigation with no charges.18
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Molly White
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Molly White
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A Kalshi partnership with CNN and CNBC will place Kalshi prices alongside news stories — inviting readers to view these as probabilities and encouraging them to place their own wagers. Kalshi gets the imprimatur of journalistic legitimacy; CNN — fresh off layoffs — gets cash.

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The Kalshi prediction market, which has been operating in the US since its 2021 launch, has inked a partnership with CNN and CNBC because everything is gambling now. Much as you can no longer watch a hockey game without seeing a gambling advertisement every 13 seconds21, Kalshi prices will now appear beside news stories — inviting readers both to view them as probabilities, and encouraging them to place their own wagers. While there has been some research validating prediction markets’ accuracy in forecasting, most of this occurred prior to the explosion in uncapped betting, when bettors were limited to wagering small amounts in tightly-constrained academic experiments. Now, with so much money on the line and so much public attention on these markets, I suspect additional factors could influence their accuracy — from bettors attempting to arbitrage between different platforms, to people attempting to manipulate the perceived “odds” of an event to their advantage. The deal is probably a win-win for both Kalshi and the news groups: Kalshi gets the imprimatur of journalistic legitimacy, while CNN — fresh off layoffs — will enjoy an infusion of cash. The specific pricetag isn’t public, but Kalshi’s recent $1 billion raise suggests the platform isn’t exactly cash‑starved.
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Molly White
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Molly White
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It’s not all good news for Kalshi, though: a federal judge in Nevada has decided their events contracts are not “swaps” under the CFTC and dissolved a preliminary injunction protecting them from civil and criminal action by the Nevada Gaming Control Board.

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It’s not all good news for prediction markets, though, as they face multiple cease-and-desist orders and lawsuits from state gaming regulators. A federal court in Nevada issued a devastating ruling late last month that event contracts based on the outcomes of sports games are not swaps that would fall under the Commodity Exchange Act, and dissolving a preliminary injunction protecting Kalshi from civil or criminal action by the Nevada Gaming Control Board. Prediction markets have been relying on the swaps argument, maintaining that the CFTC’s oversight preempts the authority of state gambling commissions. Judge Andrew Gordon, in his ruling, rejected this, and added: “Licensed gaming companies have invested millions of dollars to comply with state regulations only to supposedly find out that they could have just become CFTC-registered exchanges to offer sports gambling nationwide for anyone over the age of 18 without complying with Nevada’s gaming regulatory regime or paying taxes in this state.”22
Kalshi quickly filed for an emergency stay pending appeal, writing that they face “a threat of imminent criminal enforcement by Nevada authorities.”23 The Nevada Gaming Control Board has opposed this, arguing that “Kalshi cannot claim irreparable injury when all of its harms are self-inflicted. That is especially true because this Court and the CFTC warned Kalshi of the risks of expanding its business, and Kalshi went ahead and did it anyway. ... Kalshi has refused to make any good-faith effort to even attempt to comply with Nevada law. In contrast to Crypto.com and Robinhood, which entered into agreements with State Defendants to prevent enforcement, Kalshi flatly refused every option that State Defendants suggested, refused to propose any alternatives, and demanded that State Defendants stand down while it continues to aggressively expand its business.”24 Judge Gordon has not yet made a decision on the stay.
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Molly White
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Molly White
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A huge list of labor unions and advocacy groups have signed letters to Congress urging them not to support the draft crypto market structure legislation due to the “many systemic failures and harms” of the crypto industry that they believe are going unaddressed in the draft.

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The next day, a group of 192 consumer protection, financial reform, environmental protection, and advocacy groups, as well as some labor unions, signed a letter urging senators to “oppose any Senate cryptocurrency legislation that fails to meaningfully address the crypto industry’s many systemic failures and harms,” adding that “The legislative initiatives explored in the Senate so far have largely failed to address the widespread harms caused by the crypto industry”. The signatories include financial reform groups Americans for Financial Reform and Better Markets; consumer advocacy groups Public Citizen, the Center for Economic Justice, and the National Consumers League; advocacy groups Accountable.US, Demand Progress, Democracy for America, Our Revolution, and many local Indivisible groups; environmental groups Greenpeace, the Climate and Community Institute, and a long list of regional, state, and local environmental groups; and labor unions AFT and the Communications Workers of America.30
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