Terraform & Do Kwon to pay SEC $4.5b after fraud verdict
Share link:In this post: Terraform Labs and Do Kwon must pay over $4.5 billion after a jury finds them guilty of major crypto fraud. The fraud led to $40 billion in market value losses when Terraform’s tokens crashed in May 2022. The SEC revealed that Terraform misled investors about the stability and use of their blockchain and crypto assets.Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this pa
Terraform Labs and its co-founder, Do Kwon, have agreed to a massive $4.5 billion payout to the Securities and Exchange Commission (SEC) after a jury found them guilty of a long-running crypto fraud. This verdict follows years of deceitful practices that led to significant losses for investors when their scheme fell apart.
Also Read: Victory for Do Kwon: U.S. extradition appeal succeeds
According to the SEC, a nine-day jury trial in April revealed the depth of Terraform and Kwon’s lies. They misled investors about using the Terraform blockchain to settle transactions and falsely promoted the stability of their stablecoin, UST.
SEC says economic realities determine crypto’s security status
In May 2022, when UST lost its peg to the U.S. dollar, the value of UST and other Terraform tokens dropped to almost zero. This collapse wiped out $40 billion in market value, causing devastating losses for many, including retail investors who had invested their life savings based on Terraform’s false promises. SEC Chair Gary Gensler stated :
This case affirms what court after court has said: The economic realities of a product—not the labels, the spin, or the hype—determine whether it is a security under the securities laws.
He emphasized that Terraform and Kwon’s fraudulent activities led to catastrophic losses for investors, sometimes wiping out entire life savings. Gensler also pointed out that Terraform and Kwon resisted the SEC’s investigative efforts, even taking the fight over subpoenas to the Supreme Court. He expressed relief that the settlement would provide some justice for the victims of this massive fraud.
Also Read: Montenegro court gives the nod to the extradition of Do Kwon
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, added, “Do Kwon and Terra orchestrated one of the largest securities frauds in U.S. history by, among other things, falsely claiming that they had achieved the Holy Grail of crypto: a non-illicit use case. As the jury found, that was a lie, as was their claim of creating an ‘algorithmic stablecoin.’”
Kwon and Terraform pay billions in settlement
The SEC charged Terraform and Kwon in the U.S. District Court for the Southern District of New York on February 16 last year with securities fraud and for offering and selling securities in unregistered transactions. The Court found Terraform and Kwon liable on December 28 for these unregistered transactions.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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