A court in New York convicted Terraform Labs and co-founder Do Kwon of fraud by the United States Securities and Exchange Commission (SEC) after the SEC filed a civil complaint.
According to the SEC, Terraform Labs did not make it clear to investors that the crypto coins of the platform, TerraUSD (UST) and its token Luna (LUNA), were unstable. The SEC also found that the company had lied about partnering with Korean mobile payment apps.
“We are pleased with today’s jury verdict holding Terraform Labs and Do Kwon liable for a massive crypto fraud,” said SEC Enforcement Director Gubir Grewal. “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.”
The SEC trial began on March 25 without Kwon, who is currently in Montenegro. Courts are now considering whether to approve an extradition request from either the United States or South Korea.
The jury deliberated on the charges for a short time before convicting Terraform Labs on all six allegations. The SEC views this verdict as a precedent-setting case that highlights the need for better regulation in the cryptocurrency sector.
The fallout of the Terra/LUNA collapse in May 2022 had a significant impact on the broader crypto markets, pulling down several key crypto companies in the process.
