The US SEC has labeled the unfortunate collapse of Terraform Labs and the activities of its founder, Do Kwon as a “House of Cards.” Representing the US authority, Devon Staren said, “Terra was a fraud, a house of cards, and when it collapsed, investors lost nearly everything.”
This statement was made during the beginning of the trials in Manhattan, against Do Kwon who has been accused of several illegal acts. Responding to the assertion of Steran, Louis Pellegrino, who represents Terraform, and Kwon’s attorney David Patton have opposing opinions.
The former said that the regulator’s argument is based on selectively chosen evidence and relies heavily on the testimony of witnesses who anticipate receiving monetary rewards if the Securities and Exchange Commission (SEC) prevails in its case.
Patton supported Kwon saying that his client never claimed or portrayed Terra’s cryptocurrency as being completely without risks.
The collapse of Terraform Labs and the arrest of Do Kwon are significant events linked to the cryptocurrency world. Terraform Labs, founded by Do Kwon, faced a crisis when its two cryptocurrencies, TerraUSD and Luna, collapsed in 2022, resulting in a loss of about $37 billion in value.
In other news, the SEC’s investigation of Ethereum has raised concerns about the approval of the ETH ETF. Additionally, Binance.US points the finger at the SEC for their strained relationship with banks.
This collapse triggered the closure of several other cryptocurrency companies. Following this collapse, Do Kwon disappeared from public view but was later arrested in Montenegro for attempting to use fake travel documents while en route to Dubai.
The collapse led to various legal actions against Kwon and Terraform Labs. The US Securities and Exchange Commission (SEC) filed civil charges against them for deceiving investors about the stability of Terra, their algorithmic stablecoin, and misleading investors about integrating the Terra blockchain into a Korean mobile payment app.
Additionally, the US prosecutors have accused Kwon of committing eight offenses, such as fraud and market manipulation, in connection with the decline of TerraUSD and Luna. Do Kwon, who is accused, will not be attending his trial held in Manhattan which is anticipated to span approximately two weeks.
He was arrested in Montenegro in March 2023 and is awaiting extradition to his native South Korea, where he faces criminal charges. A Montenegro court on Friday delayed his extradition after the prosecutor’s office there voiced concerns about the process. The SEC is also seeking civil financial penalties and orders barring Kwon and Terraform from the securities industry.
