Court finds Terraform Labs guilty of defrauding crypto investors A United States District Court has found that Terraform Labs and the company co-founder, Do Kwon, defrauded investors in crypto asset securities. In a post published by the Securities and...
This story originally appeared on Due
A United States District Court has found that Terraform Labs and the company co-founder, Do Kwon, defrauded investors in crypto asset securities.
In a post published by the Securities and Exchange Committee’s (SEC) Division of Enforcement, the Southern District of New York’s District Court reached the decision after a nine-day trial.
Terraform defrauds crypto investors
Terraform Labs PTE Ltd and co-founder Do Kwon were found liable via a jury verdict after a saga lasting more than two years reached a decision.
The original subpoenas for Kwon and the company were filed by the SEC on June 9, 2022, and asked for “documents from Terraform and Kwon, as well as testimony from Kwon, were served as part of an SEC investigation into whether Kwon and Terraform violated federal securities laws in their participation in the creation, promotion, and offer to sell various digital assets related to the “Mirror Protocol,” a blockchain technology.”
The original complaint filed by the SEC on February 28, 2023, stated that Kwon and Terraform had sold crypto assets from 2018 to 2022 in unregistered transactions and would perpetrate a fraudulent scheme that would lead to a loss of $40 billion in market value to retailers and investors.
With the matter now drawing to a conclusion the SEC’s Division of Enforcement Director Gurbir S. Grewal said:
“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 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 decision to hold Kwon and the company accountable comes after the market crash in the cryptocurrency known as TerraUSD (UST). This cryptocurrency was known as a “stablecoin”, these types of crypto will use an asset or a currency to tether their worth. This is known as a “peg”.
The crash that TerraUSD was a part of would also see Sam Bankman-Fried and the cryptocurrency FTX fizzle out and burn investors for billions of dollars, as we reported earlier this month.
Director Grewal would conclude that Terraform “caused devastating losses for investors and wiped out tens of billions of market value nearly overnight. For all of crypto’s promises, the lack of registration and compliance have very real consequences for real people. As the hard work of our team shows, we will continue to use the tools at our disposal to protect the investing public, but it is high time for the crypto markets to come into compliance.”
This landmark ruling is tethered to the fate of FTX and Bankman-Fried, but may also serve as a watershed moment in the case to reform cryptocurrency as a whole and secure the investments of American investors.
Image: Ideogram.
The post Court finds Terraform Labs guilty of defrauding crypto investors appeared first on Due.
