On April 5, a Manhattan jury ruled Terraform Labs and its co-founder, Do Kwon, liable for civil fraud charges initiated by the US Securities and Exchange Commission (SEC).
Despite the verdict against the creators of the failed algorithmic UST stablecoin, Terraform Labs hinted at a potential appeal.
Reasons Behind Do Kwon’s Conviction
The jury concluded that Terraform Labs and Do Kwon misinformed investors about the stability of the algorithmic stablecoin UST and falsely claimed the Korean payment system Chai used its technology.
Gurbir Grewal, the SEC Director of Enforcement, emphasized the substantial losses investors faced due to Terra’s misleading actions, advocating for crypto companies to focus on compliance and protecting investors.
“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… causing devastating losses for investors and wiped out tens of billions of market value nearly overnight,” Grewal stated.
Nevertheless, Terraform Labs expressed disappointment with the verdict, challenging the SEC’s legal authority over the case and contemplating future actions.
This verdict marks a significant moment in crypto market scrutiny, potentially influencing future regulatory practices and investor confidence.
For Do Kwon, this verdict confirms his civil liability, amidst facing additional criminal charges in the US and South Korea related to Terra’s LUNA collapse.
Over recent months, Kwon’s extradition efforts have encountered numerous setbacks in Montenegro. Initially expected to be extradited to the US, the situation shifted when the appeals court stepped in.
The matter then progressed to the High Court, which approved his extradition to South Korea, the first nation to seek it. Yet, the Supreme Court has paused this process, leaving the final decision to the Ministry of Justice. As a result, Do Kwon’s ultimate fate is still uncertain, and his case keeps drawing worldwide interest.
