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Do Kwon, the entrepreneur behind Terraform Labs & two currencies in 2022 was found guilty of fraud by federal prosecutors in New York.
A former CEO of a Singapore-based cryptocurrency company, Terraform Labs, has been found guilty of civil fraud charges by a jury, in Manhattan. This ruling follows allegations from the US Securities and Exchange Commission that he and his company deceived investors before its cryptocurrency collapsed in 2022 leading to a market crisis.
The Accusation Was Made In 2021
The SEC accused both Terraform and Kwon of duping investors in 2021 about the stability of TerraUSD, a stablecoin designed to maintain a value of $1.
The authorities have accused both individuals of making false claims that Terraform’s blockchain technology was used in a popular Korean mobile payment app. The authorities are asking for financial penalties and orders that would prohibit Kwon and Terraform from participating in the securities industry.
Arrest Story Began in March 2023
At the end of March 2023, Do Kwon was taken into custody in Montenegro while attempting to board a flight after using Rican travel documents at a passport checkpoint.
Subsequently, US prosecutors in the Southern District of New York brought charges against him related to his leadership role at Terraform Labs.
Kwon faced eight charges including wire fraud, commodities fraud, securities fraud and conspiracy to defraud and manipulate markets. He and five others were subject to charges issued by South Korea autumn, with Interpol issuing a “red notice” seeking his arrest in September.
SEC Attorney Shared Her Words
Laura Meehan, the SEC attorney, argued during closing statements that the platform’s success story was “built on lies”. She added “If you swing big and you miss, and you don’t tell people that you came up short. That is fraud.”
Louis Pellegrino, an attorney for Terraform, defended the company by telling the jury that the SEC’s case relied on statements taken out of context. He also argued that Terraform and Kwon had been truthful about their products and how they worked, even when they failed.
The company was not pleased with the outcome of the trial. Kwon was absent during the trial. He is now subject to extradition requests from both the US and South Korea.
Kwon is known for creating cryptocurrencies TerraUSD and Luna which resulted in investors losing over $40 Billion. This happened when the TerraUSDs pegged to the dollar could not be upheld in May 2022.
Summary
The Singaporean crypto firm’s ex-CEO was found guilty of fraud in Manhattan on eight counts. The accusations include false claims that Terraform’s blockchain technology was used in a Korean mobile payment app. Investors lost over $40 Billion when the TerraUSD peg to the dollar could not be maintained in May 2022.
Disclaimer
The views and opinions stated by the author or any people named in this article are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos, or other related indexes comes with a risk of monetary loss.
Mr. Pratik chadhokar is an Indian Forex, Cryptocurrencies and Financial Market Advisor and analyst with a background in IT and Financial market Strategist. He specialises in market strategies and technical analysis and has spent over a year as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the Financial markets.
