Key Takeaways
- Terraform Labs and its founder, Do Kwon, were found liable for civil fraud charges by a Manhattan jury. The charges were brought forth by the US Securities and Exchange Commission (SEC) based on allegations of misleading investors.
- The SEC accused Terraform Labs and Kwon of misleading investors in 2021 about the stability of TerraUSD, a stablecoin pegged to the US dollar. Additionally, they were charged with falsely claiming that Terraform’s blockchain was utilized in a popular Korean mobile payment app.
- The SEC seeks civil financial penalties and orders barring Kwon and Terraform from the securities industry. US District Judge Jed Rakoff will determine the final judgment in the upcoming weeks.
Terraform Labs and its co-founder Do Kwon were hit with a fraud conviction in a New York court, causing investors to lose an estimated $40 billion.
The seven jurors in Manhattan believed Terraform Labs and Do Kwon deceived investors with claims that “CHAI,” a well-known South Korean payment app, relied on their blockchain for transactions.
The jury also found that investors were misled regarding the stability of the algorithmic mechanism designed to maintain the parity between TerraUSD (UST) and the US dollar.
Verdict
A representative from Terraform Labs expressed disappointment with the verdict, citing a perceived absence of substantiating evidence. They further raised doubts about the SEC’s jurisdiction in initiating the case, prompting them to explore legal recourse. However, Kwon’s attorney opted not to provide a comment.
What’s Next For Terraform Labs And Do Kwon?
The verdict could bring more trouble for the company and its founder in their other legal battles in the US and South Korea. However, South Korea has stricter standards for conviction, and some evidence used in the US case might not be allowed there if deemed irrelevant or outside the scope of the charges.
Do Kwon was arrested in Montenegro a year ago and later convicted of using a fake passport. Presently, he resides in the Balkan nation, where officials are deliberating whether he should be extradited to the US or to his home country, South Korea. However, the Montenegrin Supreme Court recently rejected Kwon’s extradition to Seoul, suggesting he may soon be transferred to New York.
