- Do Kwon and Terraform Labs have been found liable in US civil fraud trial.
- Jury agreed with SEC that defendants misled investors before UST stablecoin collapse in 2022.
- Terraform spokesperson expressed disappointment, saying company would weigh its options.
The TerraUSD and Luna collapse provoked a cryptocurrency market crash in 2022, so bad that it sent multiple companies into bankruptcy that year. After a series of pursuits, Terraform Labs founder Do Kwon was arrested in Montenegro in March 2023.
Read More: LUNC price loses 5% as lawyers of Terraform Labs, Do Kwon set to deliver final remarks in civil fraud trial
Do Kwon, Terraform Labs found liable in Manhattan
A Bloomberg report indicates that Do Kwon and Terraform Labs have been found responsible for misleading customers in the 2022 saga that caused a market wide crash. Specifically, a jury in Manhattan found the two defendants liable on civil fraud charges on Friday.
*DO KWON AND TERRAFORM LABS FOUND LIABLE FOR FRAUD IN SEC TRIAL: BBG
— Tree News (@News_Of_Alpha) April 5, 2024
A spokesperson for Terraform said the company is disappointed by the verdict and that it was weighing its options.
We continue to maintain that the SEC does not have the legal authority to bring this case at all.
Citing SEC Division of Enforcement Director Gurbir Grewal, “For all of crypto’s promises, the lack of registration and compliance have very real consequences for real people.”
Grewal added that the commission was pleased with the verdict, highlighting, “It is high time for the crypto markets to come into compliance.”
SEC charges against Kwon and Terraform Labs
Do Kwon and Terraform Labs had been accused by the US Securities and Exchange Commission (SEC) of misleading investors in 2021 about the stability of TerraUSD, the network’s stablecoin coined UST.
TerraUSD was designed to maintain a value of 1:1 against the dollar.
Other accusations included falsely claiming Terraform’s blockchain was used in a popular Korean mobile payment app.
Kwon is the brainchild behind both UST stablecoin and Terra Luna (LUNA), a more traditional token whose value fluctuated but was closely linked to the stablecoin.
According to the SEC, investors lost upwards of $40 billion on the two tokens combined when the UST peg to the dollar could not be maintained in May 2022.
Jury determination
After a two-week trial, the jury has finally delivered its verdict in federal court after hearing closing arguments.
US District Judge Jed Rakoff is expected to determine penalties in the coming weeks after hearing from the SEC and the defendants.
Terraform will be able to challenge that ruling on appeal after the final judgment in the case.
