Terraform Labs and CEO Convicted of Crypto Deception in New York Court

The SEC has found Terraform Labs and its co-founder Do Kwon guilty of theft, following the filing of a civil complaint. The complaint alleges that Terraform failed to disclose the volatility of its cryptocurrencies, TerraUSD (UST) and Luna (LUNA), and misled investors about partnerships with Korean mobile payment apps. The SEC considers this verdict a precedent setter, highlighting the need for stricter regulation in the cryptocurrency industry.

Terraform Labs and Co-Founder Do Kwon Convicted of Crypto Fraud by US Court

In a landmark verdict, a New York court has convicted Terraform Labs and its co-founder, Do Kwon, of theft by deception in a civil lawsuit filed by the United States Securities and Exchange Commission (SEC). The SEC alleged that Terraform Labs misled investors about the stability of its cryptocurrency, TerraUSD (UST), and its associated token, Luna (LUNA).

According to the SEC, Terraform Labs failed to disclose the inherent instability of UST and LUNA, prominently marketed as "stablecoins" that were supposedly immune to price fluctuations. The company also allegedly lied about its partnerships with popular Korean mobile payment apps, inflating the perceived legitimacy and value of its crypto assets.

"We are pleased with today's jury verdict holding Terraform Labs and Do Kwon liable for a massive crypto fraud," said Gubir Grewal, SEC Enforcement Director. "Terraform Labs and Kwon, its former CEO, deceived investors about the stability of their crypto assets and misled investors about their partnerships."

The trial commenced on March 25 without Kwon, who is currently residing in Montenegro. US and South Korean authorities are currently considering extradition requests to bring him to justice. The jury swiftly convicted Terraform Labs on all six charges, sending a strong message about the inadequate regulation and rampant fraud within the cryptocurrency sector.

The SEC views this verdict as a precedent-setting case that underscores the need for stricter oversight of cryptocurrencies. The collapse of Terraform Labs in May 2022 sent shockwaves through the crypto market, dragging down numerous other crypto companies in its wake.

"Today's verdict sends a clear message that those who cheat investors in the crypto market will be held accountable," said Grewal. "The SEC will continue to bring enforcement actions to protect investors and ensure fair and orderly crypto markets."

The SEC's investigation into Terraform Labs and Kwon is ongoing, with the possibility of further charges being filed. The verdict serves as a stark reminder of the risks associated with investing in unregulated cryptocurrencies and the importance of investor due diligence.