A jury found Terraform Labs and its co-founder Dohyung Kwon misled investors and was liable for civil fraud, according to multiple reports.
It is said that deliberations began on Friday afternoon after both sides made final arguments in the morning. report From Coinridge. The trial lasted two weeks.
Securities and Exchange Commission charged Terraform and Kwon surrounding algorithmic stablecoins in February 2023 soil Luna
-4.73%
The USD crashed in dramatic fashion a year ago.
The agency said the Singapore-based company and Kwon raised billions of dollars from investors “by offering and selling sets of interconnected cryptocurrency asset securities, in many cases through unregistered transactions.”
Algorithmic stablecoins, such as Terra USD (UST), use market incentives through algorithms to maintain stable prices. Terra has been linked to Luna, a governance token, to keep the price stable. UST collapsed in May 2022, causing losses of more than $50 billion.
SEC says Terraform and Kwon misguided These are investors’ opinions on the stability of UST. One example includes claims by Kwon and his team that a South Korean payments company called Chai is using the Terraform blockchain to settle millions of transactions. The SEC said that wasn’t true.
The main issue the jury had to examine centered around the SEC’s allegations that Kwon and Terraform violated federal securities laws by engaging in fraud related to the purchase and sale of Terraform securities. Judge Rakoff previously granted summary judgment to the SEC on Terraform’s and Kwon’s claims of an offer and sale. unregistered securities.
The first plan for the jury to consider involved the SEC’s claim that Kwon said he used Terraform’s technology even though Chai did not use Terraform’s technology in his business. The second is the SEC’s argument that the company and Kwon did not make false or misleading statements, according to Judge Jed Rakoff’s ruling. preparatory training To the jury.
Kwon and Terraform Labs deceived investors about the stability of Terra USD, resulting in significant losses, Gurbir Grewal, director of the SEC’s Enforcement Division, said in a statement.
“For all the promise of cryptocurrencies, the lack of registration and compliance has very real consequences for real people,” Grewal said. “As our team’s efforts demonstrate, we will continue to use our tools to protect the investing public, but now is the time for cryptocurrency markets to become compliant.”
A spokesperson for Terraform said it was disappointed with the jury’s verdict.
“We are very disappointed with the ruling, which we believe is not supported by the evidence.” A spokesperson said in a statement: ““We continue to assert that the SEC has absolutely no legal authority to bring this case and are carefully considering our options and next steps.”
Where is Dokwon?
Mr. Kwon released He was released from a Montenegrin prison last month but plans to remain there as authorities in several countries, including South Korea and the United States, file criminal charges against him, his lawyers said. priority His home country, where the maximum sentence for financial criminals is typically 30 to 40 years. On the other hand, the United States follows the principle that the court can impose consecutive sentences for each crime for which the defendant was convicted.
Mr. Kwon be arrested He was accused of using a fake passport while attempting to leave Montenegro in March 2023. Mr. Kwon agreed to be extradited to Korea. In June 2023, a Montenegrin court found him and sentenced him to four months in prison. feeling guilty Document forgery. Mr. Kwon appealed the court’s ruling, but lost the appeal and was eventually sentenced to four months in prison.
Updated at 19:49 UTC to add full details.
Updated at 20:19 UTC time to add statements from Terraform.
Disclaimer: The Block is an independent media outlet delivering news, research and data. As of November 2023, Foresight Ventures is a majority investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, impactful and timely information about the cryptocurrency industry. Below are our current financial disclosures.
© 2023 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.