- In March 2024, Terraform Labs and its co-founder Do Kwon were accused of fraud by a New York jury. US regulators demanded a hefty fine of $5.3 billion.
- The lawyers representing the bankrupt company refuted these allegations, stating that the majority of the company’s UST stablecoins were sold outside of the United States.
- The Securities and Exchange Commission (SEC) accused Terraform and Kwon of making over $4 billion in “unjust gains” through unregistered token sales, including LUNA and UST.
The SEC accuses Terraform Labs and its co-founder of fraud, demanding a record-breaking fine in the crypto industry. However, the company’s lawyers refute these allegations, arguing that most of their token sales occurred outside of the US.
Terraform Lawyers Deny SEC’s Accusations
On April 5, after a two-week trial, Terraform and Do Kwon were found guilty of fraud. Following this, the SEC pushed for the largest monetary penalty in the history of the crypto industry, reflecting the increasing regulatory scrutiny by US authorities. In a recent filing, the SEC emphasized the need for the court to send a clear message that such blatant abuses will not be tolerated.
SEC Accuses Terraform and Kwon of Unjust Gains
The SEC accused Terraform and Kwon of making over $4 billion in “unjust gains” through unregistered token sales, including LUNA and UST. Terraform’s algorithmic stablecoin UST, which aims to maintain parity with the US dollar, collapsed in 2022, resulting in a staggering loss of $40 billion in market value. However, Terraform’s lawyers argued in a file submitted on May 1 that most of the token sales occurred outside the US, and the SEC could not provide evidence linking Terraform and Kwon’s limited US activities to any significant loss, let alone the billions claimed as compensation by the SEC.
Conclusion
The case between Terraform Labs, its co-founder Do Kwon, and the SEC is a significant development in the crypto industry, reflecting the increasing regulatory scrutiny. While the SEC accuses the company and Kwon of making unjust gains through unregistered token sales, Terraform’s lawyers argue that most of these sales occurred outside the US. The outcome of this case could set a precedent for future regulatory actions in the crypto industry.
