SEC emerges victorious as Terraform Labs and its founder Do Kwon found liable for civil fraud by NY jury
A jury in Manhattan Federal Court has reached a verdict in the civil fraud case against Singapore-based Terraform Labs and its founder Do Kwon. The trial, which lasted just two weeks, found the defendants liable for misleading investors in 2022, as alleged by the U.S. Securities and Exchange Commission (SEC).
The SEC accused Terraform Labs and Do Kwon of deceiving investors in 2021 by providing false information about the stability of TerraUSD, a cryptocurrency designed to maintain a value of $1. During closing arguments, SEC attorney Laura Meehan emphasized the seriousness of the situation, stating that the platform’s success was based on lies. She argued that failure to disclose shortcomings amounted to fraud.
Defense attorney Louis Pellegrino argued against the SEC’s allegations, asserting that Terraform was working to rebuild and compensate purchasers. Throughout the trial, Pellegrino maintained that Terraform and Kwon had been honest about their products, even in the face of failures.
The trial focused on allegations of misleading investors and committing wire fraud through the collapse of TerraUSD and Luna, a related token, which reportedly resulted in losses exceeding $40 billion for investors. However, Do Kwon, the main person accused, was not present at the trial. Kwon was arrested in Montenegro in March 2023 and has pending extradition requests from the U.S. and South Korea.
In an official statement, SEC Division of Enforcement Director Gurbir S. Grewal expressed satisfaction with the jury’s verdict, describing it as a “massive crypto fraud.” Grewal emphasized the need for registration, compliance, and accountability in the cryptocurrency industry, citing the real consequences for investors.
The guilty verdict against Terraform Labs and Kwon could have significant implications for future cases in the crypto industry. The outcome of the trial, as well as the SEC’s statement, underscore the importance of transparency and accountability in the cryptocurrency sector.