Terraform Labs and its co-founder, Do Kwon, faced fraud charges in New York, resulting in a $5.3 billion penalty.
A New York jury brought fraud charges against Terraform Labs and its co-founder, Do Kwon, in March 2024. American regulators demanded that they pay a penalty of $5.3 billion. The New York jury brought the allegations against them.
On the other hand, the attorneys who represent Terraform refuted these charges, noting that the majority of the UST stablecoins were sold in countries other than the United States.
Terraform Labs Lawyers Refuse SEC’s Charges
On April 5, after a trial spanning over two weeks, the court found Terraform and Kwon guilty of fraud. The Securities and Exchange Commission (SEC) advocated for a significant fine, the largest in the history of the cryptocurrency business, in response to this.
This would be a reflection of the heightened regulatory attention from US authorities. In a recent filing, the Securities and Exchange Commission (SEC) pointed out how important it is for the court to make it quite clear that it will not allow such egregious misbehavior.
The Securities and Exchange Commission accused both Terraform and Kwon of amassing more than $4 billion in “ill-gotten gains” through the sale of unregistered tokens, including LUNA and UST.
Terraform developed the algorithmic stablecoin UST in 2022 to maintain parity with the US dollar, but it collapsed, resulting in a startling loss of $40 billion in market value.
On Wednesday, May 1, Terraform’s attorneys argued in a filing that the Securities and Exchange Commission (SEC) failed to provide evidence linking Terraform and Kwon’s limited activities in the United States to any significant losses, let alone the billions of dollars that the SEC is seeking to disgorge.
In a separate filing on Wednesday, the legal team representing Kwon argued that the Securities and Exchange Commission had failed to provide evidence that his connection with Terraform would have a significant and foreseeable impact in the United States.
The attorneys claim that Terraform Labs has submitted a document that refutes the SEC’s demand for $5.4 billion. Terraform Labs filed this submission the previous week.
Setting Up An Example
During that period, the Terraform lawyers expressed their belief that a fine of $1 million would be appropriate. The director of the SEC Enforcement Division, Gurbir Grewal gave a positive response to the ruling and emphasized the significance of compliance in the cryptocurrency business.
He brought attention to the considerable losses that investors had endured as a result of Terraform Labs’ activities by presenting the case as a key example.
The comments made by Grewal highlight the significant role that the SEC plays in protecting retail investors and the market as a whole. We anticipate that the verdict will caution other crypto companies against engaging in fraudulent acts, thereby serving as a deterrent.