Attorneys representing Terraform Labs and the United States Securities and Exchange Commission (SEC) are nearing the end of their trial, where it is alleged that the crypto firm provided investors with misleading information about its platform.
According to a report by Reuters on April 5, lawyers from the SEC argued in the U.S. District Court for the Southern District of New York that Terraform’s narrative was built on falsehoods. These false claims included the stability of the algorithmic stablecoin TerraUSD (UST) and an integration with a South Korean payment app. In response, Terraform attorney Louis Pellegrino stated that co-founder Do Kwon had been honest in his public statements, and that the SEC’s case relied on taking information out of context.
The civil trial with the SEC began over a year after the commission filed a lawsuit against Terraform in February 2023. At the time, the SEC accused the platform and Kwon of orchestrating a multi-billion dollar crypto asset securities fraud.
During the trial, SEC lawyers likened Terra to a “house of cards” that collapsed in 2022, resulting in significant losses for investors. The failure of Terra also contributed to a widespread downturn in the crypto market, leading to several companies, including FTX, BlockFi, and Celsius, filing for bankruptcy.
Meanwhile, the trial has proceeded without the physical presence of Kwon. The co-founder of Terraform remains in Montenegro, as the courts determine whether to grant an extradition request from the U.S. or South Korea. Kwon was arrested in March 2023 for using falsified travel documents.
In January, Judge Jed Rakoff postponed the start date of the SEC v. Terraform Labs trial to March 25, hoping to accommodate Kwon. Other prominent figures in the crypto industry who are facing legal proceedings in the U.S. include former Celsius CEO Alex Mashinsky, who is set to stand trial in January 2025, and former Binance CEO Changpeng Zhao, who has a sentencing hearing scheduled for April 30.
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