A jury in Manhattan found Singapore-based Terraform Labs and its founder Do Kwon liable on civil fraud charges on Friday, agreeing with the Securities and Exchange Commission that they misled investors before their stablecoin’s 2022 collapse shocked cryptocurrency markets.
The jury delivered the decision in federal court after a two-week trial after hearing closing arguments earlier within the day.
The SEC accused the corporate and Kwon of misleading investors in 2021 concerning the stability of TerraUSD, a stablecoin designed to keep up a worth of $1. The regulator also accused them of falsely claiming Terraform’s blockchain was utilized in a preferred Korean mobile payment app.
SEC attorney Laura Meehan said during closing arguments that the platform’s success story was “built on lies.”
“For those who swing big and also you miss, and also you don’t tell those that you got here up short, that’s fraud,” Meehan said.
Louis Pellegrino, an attorney for Terraform, told the jury on Friday the SEC’s case relied on statements taken out of context and that Terraform and Kwon had been truthful about their products and the way they worked, even after they failed.
“Terraform remains to be on the market, attempting to rebuild and make purchasers whole,” he said.
The regulator is looking for civil financial penalties and orders barring Kwon and Terraform from the securities industry.
Kwon, who was arrested in Montenegro in March 2023, didn’t attend the trial, which began on March 25. Each the US and South Korea, where Kwon is a citizen, have sought his extradition on criminal charges.
Kwon designed TerraUSD and Luna, a more traditional token that fluctuated in value but was closely linked to TerraUSD.
The SEC estimates investors lost greater than $40 billion on the 2 tokens combined when the TerraUSD peg to the dollar couldn’t be maintained in May 2022.
Their collapse also dragged down the worth of other cryptocurrencies, including bitcoin, and caused wider havoc within the crypto market, leading several firms to file for bankruptcy in 2022.
Terraform itself filed for bankruptcy protection in January.
The SEC has said Kwon and Terraform secretly arranged to have a 3rd party purchase large amounts of TerraUSD to prop up the worth when the stablecoin slipped from its peg a 12 months earlier, in May 2021. Kwon falsely attributed the recovery to the reliability of TerraUSD’s algorithms, based on the regulator.
The SEC also has said Kwon and Terraform falsely touted Terraform’s blockchain as getting used to process and settle transactions between customers and merchants on the Chai payment app.
Pellegrino said on Friday that Terraform had disclosed that TerraUSD’s peg needed to be defended in May 2021. He said Chai had used the corporate’s blockchain, however the technical details of the way it did so weren’t vital to investors.
A jury in Manhattan found Singapore-based Terraform Labs and its founder Do Kwon liable on civil fraud charges on Friday, agreeing with the Securities and Exchange Commission that they misled investors before their stablecoin’s 2022 collapse shocked cryptocurrency markets.
The jury delivered the decision in federal court after a two-week trial after hearing closing arguments earlier within the day.
The SEC accused the corporate and Kwon of misleading investors in 2021 concerning the stability of TerraUSD, a stablecoin designed to keep up a worth of $1. The regulator also accused them of falsely claiming Terraform’s blockchain was utilized in a preferred Korean mobile payment app.
SEC attorney Laura Meehan said during closing arguments that the platform’s success story was “built on lies.”
“For those who swing big and also you miss, and also you don’t tell those that you got here up short, that’s fraud,” Meehan said.
Louis Pellegrino, an attorney for Terraform, told the jury on Friday the SEC’s case relied on statements taken out of context and that Terraform and Kwon had been truthful about their products and the way they worked, even after they failed.
“Terraform remains to be on the market, attempting to rebuild and make purchasers whole,” he said.
The regulator is looking for civil financial penalties and orders barring Kwon and Terraform from the securities industry.
Kwon, who was arrested in Montenegro in March 2023, didn’t attend the trial, which began on March 25. Each the US and South Korea, where Kwon is a citizen, have sought his extradition on criminal charges.
Kwon designed TerraUSD and Luna, a more traditional token that fluctuated in value but was closely linked to TerraUSD.
The SEC estimates investors lost greater than $40 billion on the 2 tokens combined when the TerraUSD peg to the dollar couldn’t be maintained in May 2022.
Their collapse also dragged down the worth of other cryptocurrencies, including bitcoin, and caused wider havoc within the crypto market, leading several firms to file for bankruptcy in 2022.
Terraform itself filed for bankruptcy protection in January.
The SEC has said Kwon and Terraform secretly arranged to have a 3rd party purchase large amounts of TerraUSD to prop up the worth when the stablecoin slipped from its peg a 12 months earlier, in May 2021. Kwon falsely attributed the recovery to the reliability of TerraUSD’s algorithms, based on the regulator.
The SEC also has said Kwon and Terraform falsely touted Terraform’s blockchain as getting used to process and settle transactions between customers and merchants on the Chai payment app.
Pellegrino said on Friday that Terraform had disclosed that TerraUSD’s peg needed to be defended in May 2021. He said Chai had used the corporate’s blockchain, however the technical details of the way it did so weren’t vital to investors.
