SEC begins multibillion-dollar fraud trial against Terraform Labs and Do Kwon

The U.S. Securities and Exchange Commission (SEC) has charged Terraform Labs and its co-founder Do Kwon with committing multi-billion-dollar crypto-asset securities fraud.

According to a Reuters report on March 26, the high-profile trial kicked off in the U.S. Federal District Court for the Southern District of New York. Terraform Labs and Kwon are accused of being the main parties involved in this huge financial fraud case. Once the case collapsed, almost all investors suffered huge losses.

The trial marks the final chapter of one of the crypto industry’s biggest black swan events.

The SEC accused Terraform Labs and Kwon of committing multi-billion-dollar crypto-asset securities fraud in a February 2023 lawsuit.

House of Cards

The SEC’s legal team, led by attorney Devon Staren, bluntly called Terra a “house of cards,” hinting at its potential instability that could lead to the loss of significant investor capital.

At the heart of the SEC's allegation, Terraform Labs and Kwon deliberately misled investors about the stability of Terra USD (USTC).

The algorithmic stablecoin failed to maintain a fixed exchange rate with the U.S. dollar, causing billions of dollars to disappear from the network in a matter of hours. The failure is seen as a catalyst for wider turmoil in the crypto market in 2022, leading to the bankruptcy of a series of cryptocurrency companies.

Legal proceedings originally scheduled to begin in January were postponed to March, in part because Kwon was expected to appear in person to defend the case. However, Kwon remains stranded in Montenegro after the country overturned a previous ruling to extradite him to the United States.

In a December 2023 development, Judge Jed Rakoff issued a summary judgment upholding the SEC's position on Terra's dealings with unregistered securities, while siding with Kwon and the company on charges related to the offer and sale of security-based swaps. platform.

Terra’s statement

In a poignant message released on the eve of the trial, Terraform Labs broke its recent silence to express the seriousness of the situation.

CEO Chris Amani acknowledged the intense preparations for the trial and the company's strategic decision to limit public communications during the proceedings.

Amani wrote:

"The next few weeks will determine the future of the TFL. There have been many accusations and this is our chance to finally tell our side of the story."

Terraform Labs reminded everyone in the statement that during the court trial, we hope everyone can maintain a peaceful mind and not rush to make judgments. As the trial of the case progresses, various facts and evidence will gradually be revealed to everyone. At that time, everyone can re-evaluate and understand the entire incident based on this real information.

Gratitude runs throughout the statement released by Terraform Labs, expressing heartfelt thanks to the Terraform community for their unwavering support during the company's turbulent times. This gratitude is not limited to community members, but also includes those programmers who are still committed to the development of the Terra platform despite adversity and partners who maintain cooperation. It is the joint efforts and perseverance of these people that build a strong backing and support the company to move forward.

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