In a landmark verdict, a jury in New York has found Terra founder Do Kwon liable for civil fraud charges leveled against him by the Securities and Exchange Commission (SEC). The verdict, reached after a two-week trial in federal court, marks a significant development in the legal battle surrounding Terra and its stablecoin, TerraUSD.
Do Kwon, who was apprehended in Montenegro in March 2023, did not attend the trial, which concluded with closing arguments presented by both parties. Both the United States and South Korea have sought his extradition on criminal charges related to the case. Terraform Labs, the company behind Terra, had previously filed for bankruptcy protection in January, adding complexity to the legal proceedings.
The SEC’s case against Kwon and Terraform Labs centered on allegations of misleading investors with false claims regarding the stability of TerraUSD, resulting in substantial losses estimated at around $40 billion. The alleged misconduct also purportedly triggered a broader collapse in the cryptocurrency market.
Specifically, the SEC accused Kwon and Terraform Labs of orchestrating a scheme to manipulate the market by arranging for a third party to purchase a significant quantity of TerraUSD in May 2021. The regulator asserted that Kwon and the company falsely attributed the recovery to the reliability of TerraUSD’s algorithms, deceiving investors in the process. Furthermore, the SEC contended that Kwon and Terraform Labs made deceptive statements regarding the integration of their blockchain with Chai, a popular payment application in Korea.
The verdict against Do Kwon underscores the SEC’s commitment to holding individuals and entities accountable for fraudulent practices in the cryptocurrency space. It also serves as a warning to other market participants about the consequences of engaging in deceptive conduct that undermines investor confidence and market integrity.
As the legal proceedings continue and extradition efforts unfold, the fallout from the Terra scandal is likely to reverberate throughout the cryptocurrency industry, prompting calls for enhanced regulatory oversight and investor protection measures.
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