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Author: Jody Godoy, Reuters; Compiled by: Deng Tong, Bitchain Vision
Terraform Labs and its founder Do Kwon will be tried in Manhattan on Monday,Regulators accused them of liaring to investors before the company’s two cryptocurrencies collapsed, which disrupted the market in 2022.
The SEC accused Kwon and the Singapore-based blockchain company of misleading investors in 2021 about the stability of TerraUSD, a stablecoin designed to maintain a $1 value.Regulators have also accused them of liaring that Terraform’s blockchain is used in popular mobile payment apps in South Korea.
Kwon will not attend the trial.He was arrested in Montenegro last March and is awaiting extradition to his native South Korea, where he faces criminal charges.A Montenegro court postponed his extradition on Friday after the country’s prosecutor’s office expressed concerns about the extradition process.
New York federal prosecutors also charged Mr. Hunter for fraud and are seeking to extradite him to the United States.
Kwon designed TerraUSD and Luna, a more traditional token that fluctuates its value but is closely related to TerraUSD.
The Securities and Exchange Commission estimates thatInvestor losses in the two tokens totaled more than $40 billion as TerraUSD was not able to maintain its peg to the US dollar in May 2022.
Their collapse has also dragged down the value of other cryptocurrencies, including Bitcoin, and has caused wider damage to the crypto market, resulting in multiple companies filing for bankruptcy in 2022.
SEC said,Kwon and Terraform secretly arranged for third parties to buy a large amount of TerraUSD to support the price of the stablecoin when it left the anchor exchange rate a year ago (i.e. May 2021).Regulators say Kwon mistakenly attributes the price recovery to the reliability of stablecoins TerraUSD’s algorithm.
The SEC also claimsKwon and Terraform mispromote Terraform’s blockchain to process and settle transactions between customers and merchants on the Chai payment application.
Kwon and Terraform denied misconduct and said the SEC looked at the statements of Kwon and other Terraform employees out of context.
The SEC is seeking civil and economic penalties and orders to ban Kwon and Terraform from entering the securities industry.
Last December, U.S. District Judge Jed Rakoff awarded the SEC partial victory, ruling that Terraform Labs illegally sold digital assets without registering them as securities.
The judge dismissed the SEC allegation that Terraform and Kwon illegally provide securities-based swaps through a feature that allows users to create digital assets that reflect the price of another asset, such as a different cryptocurrency or stock.
The judge has not yet determined the amount of damages Terraform must pay, but the company filed for bankruptcy protection in January and said the fine could exceed its assets.
