A U.S. District Court jury found that. Terraform Lab and its co-founder, Do Kwoncharged with defrauding investors with crypto securities.
The court previously found that the company and Mr. Kwon illegally offered and sold crypto securities. securities and exchange commission The (SEC), which filed the lawsuit, said on Friday (April 5): statement.
“Terraform Labs and its former CEO, Mr. Kwon, deceived investors about the security of their crypto assets and the stability of the so-called algorithmic stablecoin Terra USD, and the popular payment application was unable to process and settle payments.” further misled investors as to whether Terraform's blockchain was used.'' SEC Enforcement Director Gurbir S. Grewal said in a statement.
“Through these deceptions, the defendants caused catastrophic losses to investors and wiped out tens of billions of dollars in market value almost overnight,” Grewal added.
Contacted by PYMNTS, a Terraform Labs spokesperson said in an email Friday: “We are very disappointed in this decision, which we do not believe is supported by the evidence. We continue to maintain that the SEC lacks any legal authority to bring this action and are carefully considering our options and next steps.”
Reuters reported on Friday that the SEC is seeking civil monetary penalties and an order barring Terraform and Kwon from the securities industry. The judge will hear from the SEC and the defendants in the coming weeks and consider penalties.
The lawsuit centered around Terraform's TerraUSD (UST). stable coin TerraUSD was designed to remain pegged to the US dollar, but crashed in May 2022. TerraUSD was the third largest stablecoin by market capitalization before losing its peg.
This crash led to the bankruptcy of several well-known crypto companies, including FTX, co-founded by Sam Bankman Fried. There have also been growing calls for global regulation of virtual currencies.
“Despite the promise of cryptocurrencies, the lack of registration and compliance has very real consequences for real people,” Grewal said in a statement Friday. “As our team’s diligent efforts demonstrate, we will continue to use the tools at our disposal to protect public investors, but the time has come for the crypto market to become compliant.”
