HomeNewsTerraform Labs Verdict: Founder Do Kwon Held Responsible for Investor Fraud

Terraform Labs Verdict: Founder Do Kwon Held Responsible for Investor Fraud

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  • SEC presented evidence of Terraform’s secret interventions to artificially boost TerraUSD’s price, contradicting public stability claims.
  • Following the verdict, Terraform Labs to consider further legal steps; court to decide on fines, industry bans.

A federal jury in Manhattan concluded that Terraform Labs and its CEO, Do Kwon, committed civil fraud, agreeing with the U.S. Securities and Exchange Commission (SEC) that they provided misleading information regarding the stability of TerraUSD before its $40 billion loss in value in 2022. 

The trial, which lasted two weeks, scrutinized Terraform’s promotional practices for TerraUSD, a digital currency designed to be equivalent in value to the US dollar. The SEC charged the company and Kwon with falsely advertising that TerraUSD’s valuation was securely maintained by algorithms and that its blockchain technology was employed by a prominent payment app in Korea.

Related: LUNC Update: Terra Luna Classic Community Sticks to KYC Policy; 105 Billion Tokens Obliterated

The SEC demonstrated during the trial that, contrary to their claims, Terraform Labs had secretly orchestrated significant purchases to artificially maintain TerraUSD’s price in May 2021, attributing its stability to the currency’s design falsely. This scheme was exposed in May 2022, significantly impacting the cryptocurrency market and precipitating the downfall of Luna, a related digital currency.

About: Terra Luna Classic Faces 30% Decline: LUNC Price Crash and SEC Hearing Impact

Following the jury’s decision, Terraform Labs expressed its intention to seek further legal options. The SEC’s head of enforcement highlighted the verdict as a pivotal moment for the cryptocurrency industry to align with existing regulations to safeguard investors. The court will now determine the appropriate sanctions and possible industry prohibitions for Terraform Labs and Kwon.

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Isai Alexei
Isai Alexei
As a content creator, Isai Alexei holds a degree in Marketing, providing a solid foundation for the exploration of technology and finance. Isai's journey into the crypto space began during academic years, where the transformative potential of blockchain technology was initially grasped. Intrigued, Isai delved deeper, ultimately making the inaugural cryptocurrency investment in Bitcoin. Witnessing the evolution of the crypto landscape has been both exciting and educational. Ethereum, with its smart contract capabilities, stands out as Isai's favorite, reflecting a genuine enthusiasm for cutting-edge web3 technologies. Business Email: info@ethnews.com Phone: +49 160 92211628