Terraform Labs, Do Kwon Held Liable in $40 Billion Fraud Case

After a two-week trial, a Manhattan jury has found Terraform Labs and its founder, Do Kwon, liable for civil fraud charges brought by the U.S. Securities and Exchange Commission (SEC). The SEC had accused the Singapore-based company and Kwon of misleading investors regarding the stability of their cryptocurrency, TerraUSD, which was purported to maintain a peg to the U.S. dollar. The regulator also alleged that Terraform made false claims about the usage of its blockchain technology in a popular Korean mobile payment application.

The case unfolded without Kwon's presence, as he was detained in Montenegro pending potential extradition to the United States or South Korea on separate criminal charges. The jury's verdict has significant implications, as it supports the SEC's stance that Terraform Labs operated without proper registration and misled investors, causing substantial losses following the collapse of TerraUSD in 2022. The SEC is seeking civil monetary penalties and is looking to bar Kwon and Terraform from the securities industry. The outcome of this trial contributes to the ongoing scrutiny and regulatory challenges facing the cryptocurrency sector.