NY Jury Finds Terraform Labs Liable for Fraud
Do Kown was also found liable for civil fraud, in veridict that the US SEC will 'proudly' pocket as a victory
April 6, 2024 07:08 AM
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TL;DR A New York jury has found Terraform Labs and its founder, Do Kwon, liable for civil fraud. The verdict, which supports the SEC's allegations, marks a significant moment in the crypto industry and emphasizes the importance of transparency and regulatory compliance.
A recent verdict from a Manhattan Federal Court jury has made headlines in the cryptocurrency world, finding Terraform Labs and its founder, Do Kwon, guilty of civil fraud charges.
The verdict comes after a two-week trial, where the U.S. Securities and Exchange Commission (SEC) accused them of misleading investors in 2021 regarding the stability of TerraUSD, a stablecoin designed to maintain a value of $1.
The Allegations and Defense
During the trial, SEC attorney Laura Meehan highlighted the misleading success story of Terraform Labs, built on what she described as lies.
In contrast, Terraform's defense, led by attorney Louis Pellegrino, maintained that the company and Kwon were honest about their product, even when facing setbacks. The defense argued that Terraform is actively trying to rebuild and compensate its investors.
The case centered around the dramatic collapse of TerraUSD and its sister token Luna, which resulted in over $40 billion in investor losses. The absence of Do Kwon, due to his arrest in Montenegro and pending extradition requests, added another layer of intrigue to the trial.
"For all of crypto's promises, the lack of registration and compliance have very real consequences for real people," stated Gurbir S. Grewal, SEC Division of Enforcement Director, expressing his satisfaction with the jury's verdict.
Implications for the Crypto Industry
This verdict not only holds Terraform Labs and Do Kwon accountable but also sets a significant precedent for the cryptocurrency industry.
It underscores the SEC's message about the critical need for transparency and regulatory compliance within the sector. The outcome of this case could influence future regulatory actions and the approach of crypto firms towards compliance and investor communication.