A United States district court has found that Terraform Labs and the company's co-founder, Do Kwon, defrauded investors in crypto-asset securities.
In one POST published by the Securities and Exchange Commission's (SEC) Division of Enforcement, the District Court for the Southern District of New York made the decision after a nine-day trial.
Terraform scams crypto investors
Terraform Labs PTE Ltd and co-founder Do Kwon were found liable via a jury verdict after a saga spanning more than two years reached a verdict.
The original subpoenas for Kwon and the company were filed by the SEC on June 92022, and requested “documents from Terraform and Kwon, as well as testimony from Kwon, served as part of an SEC investigation into whether Kwon and Terraform violated federal securities laws in their participation in the creation, promotion and offer to sell various digital assets related to Mirror Protocol, a blockchain technology.”
of original complaint filed by the SEC on February 28, 2023, stated that Kwon and Terraform had sold crypto assets from 2018 to 2022 in unregistered transactions and would conduct a fraudulent scheme that would lead to a loss of $40 billion in market value to the sellers and investors.
At the conclusion of the case, SEC Enforcement Division Director Gurbir S. Grewal said:
“We are pleased with today's jury verdict holding Terraform Labs and Do Kwon liable for a massive crypto fraud. Terraform Labs and Kwon, its former CEO, misled investors about the security stability of crypto assets and the so-called algorithmic stablecoin Terra USD, and they further misled investors if a popular payment application used Terraform's blockchain to process and settle payments.”
The decision to hold Kwon and the company accountable comes after the market crash in the cryptocurrency known as TerraUSD (UST). This cryptocurrency was known as a “stablecoin”, these types of cryptos will use an asset or a currency to peg their value. This is known as a “pin”.
The crash that TerraUSD was a part of would also cause Sam Bankman-Fried and the FTX cryptocurrency to dissolve and burn investors for billions of dollars, as we reported earlier this month.
Director Grewal would conclude that Terraform “caused devastating losses to investors and wiped out tens of billions in market value almost overnight. For all the promise of crypto, the lack of registration and compliance has very real consequences for real people. Like hard work e team indicates that we will continue to use the tools at our disposal to protect the investing public, but it is high time for the crypto markets to comply.”
This historic decision is tied to the fate of FTX and Bankman-Fried, but it could also serve as a turning point in the case to reform cryptocurrency as a whole and secure the investments of American investors.
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