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Terraform Labs and Do Kwon Found Guilty of Fraud
Terraform Labs and its co-founder, Do Kwon, have been found guilty of fraud in a civil case brought against them by the United States Securities and Exchange Commission (SEC). The jury in the U.S. District Court for the Southern District of New York delivered the verdict in federal court after a two-week trial after hearing closing arguments earlier in the day, according to an official announcement.
Allegations by the SEC
The SEC alleged that Terraform Labs and its former CEO, Kwon, deceived investors regarding the stability of their crypto asset security and algorithmic stablecoin called Terra USD. Furthermore, they were accused of misleading investors about whether Terraform’s blockchain was used by a popular payment application for processing and settling payments.
Verdict and Charges
According to the verdict filed on April 5, the jury found Kwon and Terraform Labs liable for six charges. Additionally, they determined that the platform had acted recklessly by making false or misleading statements regarding the offer or sale of TerraUSD (UST), Luna, or wLUNA.
Comparison to “House of Cards”
Throughout the trial, SEC attorneys likened the platform to a “house of cards” and alleged that the company and Kwon had lied to investors.
Market Impact and Bankruptcies
The collapse of Terraform Labs in May 2022 had significant implications for the crypto market, contributing to a major downturn and leading to bankruptcy filings from prominent firms such as FTX, BlockFi, and Celsius.
Legal Proceedings
The SEC filed its lawsuit against Terraform and Kwon in February 2023, accusing them of orchestrating a multi-billion dollar crypto asset securities fraud. In December, Judge Jed Rakoff granted a partial summary judgment in favor of Terraform regarding the unregistered offer and sale of security-based swaps.
Extradition Case of Do Kwon
Meanwhile, the impact of the verdict on Kwon’s extradition from Montenegro remains uncertain. Both the United States and South Korea have filed competing claims for Kwon’s extradition, with Montenegro now juggling whose claim to prioritize. Kwon’s legal team is pushing for extradition to South Korea first, where analysts expect he’ll be given a lighter sentence.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
