- Terraform Labs and founder Do Kwon found guilty of civil fraud by a Manhattan jury, following misleading claims about TerraUSD stability and blockchain usage.
- The SEC seeks civil penalties and industry bans for Kwon and Terraform Labs, emphasizing the significant investor losses and the urgent need for crypto market compliance.
The collapse of TerraUSD and Luna adversely impacted the value of various cryptocurrencies, including Bitcoin, triggering broader turmoil in the crypto market. In fact, this collapse led to multiple companies declaring bankruptcy in 2022.
In March 2023, Terraform Labs' founder, Do Kwon, was arrested in Montenegro. However, he did not appear at his trial, which started on March 25. Both the United States and South Korea, where Kwon holds citizenship, have requested his extradition on criminal charges.
Later, in January of this year, Terraform Labs filed for Chapter 11 bankruptcy protection.
Now, according to a report, on Friday, a Manhattan jury found Terraform Labs and Kwon, guilty of civil fraud charges. The SEC charged the Singapore-based company and Kwon with providing misleading information in 2021 regarding the stability of TerraUSD, a stablecoin pegged to maintain a $1 value.
Additionally, they were accused of falsely claiming that Terraform's blockchain technology was integrated into a widely used Korean mobile payment app.
“The defendants caused devastating losses for investors and wiped out tens of billions of market value nearly overnight. For all of crypto’s promises, the lack of registration and compliance have very real consequences for real people. As the hard work of our team shows, we will continue to use the tools at our disposal to protect the investing public, but it is high time for the crypto markets to come into compliance,” Gurbir Grewal, SEC Division of Enforcement director, wrote in a statement.
The SEC is now seeking civil financial penalties and is requesting that Kwon and Terraform be banned from the securities industry. U.S. District Judge Jed Rakoff is set to determine the penalties in the upcoming weeks, following submissions from both the SEC and the defendants.
Edited by Harshajit Sarmah
