Close this search box.
Blog » News » Court finds Terraform Labs guilty of defrauding crypto investors

Court finds Terraform Labs guilty of defrauding crypto investors

A flower blooms with coins instead of petals

A United States District Court has found that Terraform Labs and the company co-founder, Do Kwon, defrauded investors in crypto asset securities.

In a post published by the Securities and Exchange Committee’s (SEC) Division of Enforcement, the Southern District of New York’s District Court reached the decision after a nine-day trial.

Terraform defrauds crypto investors

Terraform Labs PTE Ltd and co-founder Do Kwon were found liable via a jury verdict after a saga lasting more than two years reached a decision.

The original subpoenas for Kwon and the company were filed by the SEC on June 9, 2022, and asked for “documents from Terraform and Kwon, as well as testimony from Kwon, were 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 the “Mirror Protocol,” a blockchain technology.”

The 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 perpetrate a fraudulent scheme that would lead to a loss of $40 billion in market value to retailers and investors.

With the matter now drawing to a conclusion the SEC’s Division of Enforcement 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, deceived investors about the stability of the crypto asset security and so-called algorithmic stablecoin Terra USD, and they further misled investors about whether 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 crypto will use an asset or a currency to tether their worth. This is known as a “peg”.

The crash that TerraUSD was a part of would also see Sam Bankman-Fried and the cryptocurrency FTX fizzle out and burn investors for billions of dollars, as we reported earlier this month.

Director Grewal would conclude that Terraform “caused devastating losses for investors and wiped out tens of billions of market value nearly overnight. For all of crypto’s promises, the lack of registration and compliance have very real consequences for real people. As the hard work of our team shows, 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 come into compliance.”

This landmark ruling is tethered to the fate of FTX and Bankman-Fried, but may also serve as a watershed moment in the case to reform cryptocurrency as a whole and secure the investments of American investors.

Image: Ideogram.

About Due’s Editorial Process

We uphold a strict editorial policy that focuses on factual accuracy, relevance, and impartiality. Our content, created by leading finance and industry experts, is reviewed by a team of seasoned editors to ensure compliance with the highest standards in reporting and publishing.

Financial News Writer and Editor
Brian-Damien Morgan, an accomplished journalist and features writer, boasts a rich career that has evolved across various media platforms. With extensive experience in the print sector of several UK newspapers, Brian transitioned seamlessly into the realm of digital broadcasting and specialized financial content creation. Brian now focuses on finance, technology, legal matters, and the wide spectrum of money-related topics.

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.


Top Trending Posts

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More