The United States District Court for the Southern District of New York has found Terraform Labs and its co-founder and CEO liable for civil fraud charges brought by the US Securities and Exchange Commission (SEC) in May 2022. The SEC accused Do Kwon and his company of misleading investors about the Terra ecosystem, stablecoin Terra USD (UST), and the network’s use cases.
“Previously, the Court found that Terraform Labs and Kwon unlawfully offered and sold crypto asset securities in violation of the registration provisions of the Securities Act of 1933,” SEC said in a statement on April 5.
Terraform Labs, which ran LUNA coin and Terra USD stablecoin, crashed in days, wiping off $40 billion in market value. Do Kw, who was reported on a flight with key team members from the US to Singapore when the final moments of the crash unfolded, eventually escaped out of the city-state.
“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,” SEC said in its press release.
After remaining elusive for nine months, Kwon was arrested in Montenegro for travelling on forged documents. He was convicted and handed a four-month prison term, which he has completed. The Montenegro court cleared his extradition to South Korea, but the matter is in the Supreme Court right now as the US SEC wants Kwon to be extradited to the US and face the charges.
