US Judge Rules in SEC Case: Terraform Labs Found Guilty of Selling Unregistered Securities

A federal judge ruled in favor of the U.S. Securities and Exchange Commission (SEC) regarding allegations that Terraform Labs and its founder, Do Kwon, engaged in the offering and sale of unregistered securities, as per a recent Reuters report.

U.S. District Judge Jed Rakoff in Manhattan also sided with the defendants concerning SEC claims related to security-based swaps. However, he rejected motions for summary judgment from both parties on the SEC's fraud allegations. The case is set to proceed to trial on January 29, 2024.

Do Kwon, known for creating two cryptocurrencies, TerraUSD and its associated token Luna, faced significant losses in 2022—estimated at $40 billion or more—when TerraUSD failed to maintain its 1:1 peg to the U.S. dollar.

The SEC accused Terraform and Kwon of providing misleading information to investors regarding the stability of TerraUSD, falsely asserting that their crypto tokens would experience value appreciation.

In addition to the SEC case, Kwon is also facing fraud charges from U.S. prosecutors in Manhattan and is currently contesting extradition to the United States.

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Reuters