In a civil case brought forth by the U.S. Securities and Exchange Commission (SEC), Terraform Labs and its co-founder Do Kwon have been found guilty of defrauding investors, as per a jury verdict rendered in the U.S. District Court for the Southern District of New York.
Announcing the outcome on April 5, SEC Enforcement Director Gurbir Grewal revealed that jurors swiftly reached a decision, holding Kwon and Terraform accountable for their actions in the civil enforcement case. The trial commenced on March 25, with Kwon absent from court proceedings as he remains in Montenegro while awaiting a decision on extradition requests from the United States and South Korea.
Expressing satisfaction with the jury's ruling, Grewal emphasized the significance of the verdict in holding Terraform Labs and Kwon responsible for what he described as "massive cryptocurrency fraud." Grewal highlighted investor deception regarding the stability of Terra USD and misleading information suggesting widespread adoption of Terraform's blockchain in payment processing applications.
The failure of Terraform to register with regulatory authorities was underscored by Grewal as having tangible adverse effects on investors, with the SEC reiterating the imperative of compliance with regulatory frameworks. Throughout the trial, SEC attorneys depicted Terraform as a precarious structure akin to a "house of cards," accusing the company and Kwon of deceiving investors.
Responding to the verdict, a spokesperson for Terraform Labs conveyed profound disappointment, asserting their belief that the outcome lacked evidentiary support. They also questioned the SEC's jurisdiction in bringing the case, affirming that they are meticulously evaluating their options and determining their next course of action.
The jury's decision found Kwon and Terraform liable on six counts, as outlined in the verdict filed on April 5 in the U.S. District Court for the Southern District of New York. Additionally, the platform was deemed to have made false or misleading statements recklessly regarding the offer or sale of TerraUSD (UST), Luna, or wLUNA.
