The SEC accused Terraform Labs and Do Kwon of deceiving investors regarding the functionality of Terra USD.



Do Kwon faces additional criminal charges in the US and South Korea.




A Manhattan jury has pronounced Terraform Labs and its co-founder, Do Kwon, liable for civil fraud charges brought forth by the US Securities and Exchange Commission (SEC).



The verdict followed accusations of misleading investors regarding the stability of Terra USD (UST), an algorithmic stablecoin, and the purported capabilities of the Terra blockchain.



The SEC accused Terraform Labs and Do Kwon of deceiving investors about UST’s functionality and the Terra blockchain’s potential applications. The nine-day trial concluded swiftly, with the jury siding with the SEC’s claims.



See Related: SEC Sues Terraform Labs And Founder Do Kwon For Fraud And Sale Of Unregistered Securities



SEC’s Director of Division of Enforcement Gurbir Grewal mentioned : “We are pleased with today’s jury verdict holding Terraform Labs and Do Kwon liable for a massive crypto fraud.”



“Terraform Labs and Kwon, its former CEO, deceived investors about the stability of the crypto asset security and so-called algorithmic stablecoin Terra USD, and they further misled investors about whether a popular payment application used Terraform’s blockchain to process and settle payments.”




Today, after a nine-day trial, a jury in the United States District Court for the Southern District of New York found Terraform Labs PTE Ltd. & Do Kwon liable for defrauding investors in crypto asset securities. More: https://t.co/dRtq3ITGMG pic.twitter.com/kwlpKXxv6r — U.S. Securities and Exchange Commission (@SECGov) April 5, 2024




Critical Verdict By SEC’s Attorney



During the trial, the SEC’s attorney, Laura Meehan, disclosed a secret agreement between Terraform Labs, Do Kwon, and institutional investor Jump Trading to salvage UST’s value during a de-pegging incident in May 2021. This intervention was concealed from the public to bolster the illusion of the algorithm’s efficacy.



Despite attempts by Terraform Labs and Do Kwon’s legal team to downplay Jump Trading’s involvement, arguing it was standard market activity, the jury found their defense unconvincing, highlighting the extent of the deception, Coindesk reported.



While Terraform Labs contests the verdict, Do Kwon faces additional criminal charges in the US and South Korea related to the Terra ecosystem’s collapse. His extradition status remains uncertain as multiple countries vie for jurisdiction.
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