SEC Secures Positive Ruling Against Do Kwon

A jury in Manhattan found Terraform Labs and its founder, Do Dkwon, guilty of civil fraud charges on Friday, April 5.

The jury claimed Kwon and his company misled investors before the 2022 collapse of their ecosystem.

SEC Wins Case Against Do Kwon and Terraform Labs

The jury’s decision aligns with the US SEC’s long-term view of Kwon and the Terra ecosystem. The regulator claimed Kwon lied about the stability of the TerraUSD stablecoin. The SEC also charged them with other false claims. This includes claims that a well-known Korean mobile payment app used Terraform’s blockchain.

The SEC concluded that investors lost over $40 billion after TerraUSD lost its peg to the dollar in May 2022. The regulator wants rulings prohibiting Kwon and Terraform from the securities sector. They also demand civil financial penalties. US District Judge Jed Rakoff will review sanctions in the coming weeks.

Terra’s decline in 2022 may have contributed to the significant decline of other companies such as FTX, BlockFi, and Celsius.

Reaction to the Ruling

The SEC trial commenced on March 25th, with Kwon notably absent. He’s currently in Montenegro. Local courts are currently deliberating his extradition to the US or South Korea.

During the trial, SEC attorneys likened Terraform Labs to a “house of cards.” They explained that Terra’s unregistered status was a threat to investors. SEC Enforcement Director Gurbir Grewal, said in a statement: “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.”

Grewal added,” 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.”

Reacting to the ruling, a Terraform Labs representative said, “We are very disappointed with the verdict, which we do not believe is supported by the evidence. We continue to maintain that the SEC does not have the legal authority to bring this case at all, and we are carefully weighing our options and next steps.”

Kwon remained in Montenegro following his arrest in March 2023. After months on the run, he was apprehended while attempting to board a flight to Dubai using fake travel documents from Costa Rica. He is being sought for extradition by the US and South Korea. But his final destination is still unknown.


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