Following a nine-day trial, a jury in the United States District Court for the Southern District of New York has found Terraform Labs PTE Ltd. and its former CEO, Do Kwon, guilty of defrauding investors in crypto asset securities.
The verdict comes after the Court’s previous ruling that Terraform Labs and Kwon violated the registration provisions outlined in the Securities Act of 1933 by unlawfully offering and selling crypto asset securities.
The case against Terraform Labs and Do Kwon stemmed from allegations of fraudulent practices in the sale and promotion of crypto asset securities.
The Securities and Exchange Commission (SEC) had accused the defendants of misleading investors about the stability of the crypto asset security and the algorithmic stablecoin Terra USD.
Furthermore, they were alleged to have provided false information regarding the utilization of Terraform’s blockchain in a popular payment application for processing and settling payments. These actions resulted in substantial losses for investors, eroding billions of dollars in market value virtually overnight.
In response to mounting concerns over the lack of regulatory oversight in the cryptocurrency sector, the SEC initiated legal proceedings against Terraform Labs and Do Kwon, seeking accountability for their alleged misconduct. The trial, spanning nine days, involved rigorous examination of evidence and testimonies to ascertain the culpability of the defendants.
In response to the verdict, Gurbir S. Grewal, Director of the Division of Enforcement at the Securities and Exchange Commission (SEC), emphasized the severity of the case:
“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 the so-called algorithmic stablecoin Terra USD. They further misled investors about whether a popular payment application utilized Terraform’s blockchain to process and settle payments. Through these deceptive practices, the defendants caused significant losses for investors, wiping out tens of billions of market value almost overnight.”
The lack of registration and compliance in the crypto markets has tangible consequences for real people, Grewal added. As demonstrated by the dedication of our team, we will continue to utilize all available resources to protect investors. However, it is imperative for the crypto markets to adhere to compliance standards, he said.
