SEC Case Verdict Finds Do Kwon and Terraform Labs Guilty of Fraud

New York, April 5, 2024 - In a landmark ruling, a New York court has found Terraform Labs and its co-founder Do Kwon guilty of fraud and the collapse of the Terra ecosystem, amounting to $40 billion. The decision, announced by the U.S. Securities and Exchange Commission (SEC), marks a significant development in the case that has captivated the cryptocurrency world.

The SEC had previously accused Do Kwon and his company of misleading investors about the stability of their "algorithmic" stablecoin - Terra USD (UST), as well as various applications of the Terra blockchain.

Jurors reached their verdict on April 5 after hearing final arguments from the Commission's attorneys. The trial, concerning Do Kwon and Terraform Labs, lasted for nine days.

According to court documents, jurors agreed that Kwon and his company had provided knowingly false information about the operation algorithm of the UST stablecoin.

"We are pleased with today's jury verdict holding Terraform Labs and Do Kwon accountable for cryptocurrency fraud on a massive scale. The defendants inflicted devastating losses on investors and nearly overnight wiped out tens of billions of market value," stated Gurbir Grewal, Director of the SEC's Enforcement Division.

A representative from Terraform Labs told CoinDesk that they were disappointed with the verdict, which they believed lacked substantial evidence. They asserted that the SEC lacked legal authority to pursue this case.

Do Kwon was unable to attend the New York court session. In March, the Supreme Court of Montenegro approved the extradition of the former head of Terraform Labs to South Korea. U.S. authorities, who also levied charges against Do Kwon, announced plans to appeal this decision in their favor.

However, on April 5, the Supreme Court of Montenegro overturned the lower court's verdict on Do Kwon's extradition. According to the document, the decision on approval and the sequence of extradition must be made by the Minister of Justice.

The outcome of this case underscores the growing regulatory scrutiny surrounding cryptocurrency projects and their founders. It serves as a cautionary tale for those operating in the digital asset space, emphasizing the importance of transparency and compliance with regulatory frameworks.

As the crypto industry continues to evolve, cases like this highlight the need for robust oversight to protect investors and maintain trust in emerging financial technologies. The implications of this verdict are likely to reverberate throughout the cryptocurrency ecosystem, shaping future regulations and investor behavior.