Terra vs SEC: Terraform Labs Concludes Closing Arguments in Civil Fraud Trial Amid Investor Deception Accusations
The civil fraud trial concerning Terraform Labs and its founder, Do Kwon, is nearing its conclusion as attorneys prepare to present their closing arguments.
The trial, initiated and overseen by the U.S. Securities and Exchange Commission (SEC), focuses on allegations of wire fraud and the fraudulent manipulation of investors using TerraUSD, a stablecoin associated with Terraform’s blockchain technology.
The SEC has accused Terraform and Do Kwon of intentionally creating instability in TerraUSD in 2021, a coin designed to maintain a value of $1, in order to deceive investors and commit wire fraud. Furthermore, the SEC alleges that Terraform falsely claimed that its blockchain was integrated into a popular mobile payment app in Korea.
The SEC’s case asserts that Terraform and Kwon engaged in deceptive practices, including artificially inflating the price of TerraUSD when it deviated from its peg to the dollar. They are also accused of falsely promoting Terraform’s blockchain as the core infrastructure for transaction processing in the Chai payment app.
In their defense against these allegations, Terraform and Kwon’s legal team has consistently argued that the SEC’s claims are unfounded and rely on misinterpretations and unreliable witnesses seeking financial rewards as whistleblowers. The defense denies any intention to deceive customers and emphasizes the importance of considering the context.
Kwon, who was arrested in Montenegro in 2023 for possessing a fake passport, has been absent from the trial due to his current house detention and travel restrictions. While the U.S. and South Korea have both requested his extradition on criminal charges related to the case, the Montenegrin government has not yet made a final decision on which country to grant the extradition treaty.
The collapse of TerraUSD and its closely tied token, Luna, resulted in significant losses for investors, estimated by the SEC to be over $40 billion. This collapse had wider implications, affecting the value of other cryptocurrencies and leading to bankruptcy filings by multiple companies in 2022.
As the trial nears its conclusion, both parties will present their final arguments to the jury. It is likely that the court will proceed with the case in the absence of Do Kwon unless the defense requests otherwise.