Jury Begins Deliberations in Civil Fraud Case Against Do Kwon, Terraform Labs
The U.S. SEC has argued that Do Kwon and his company lied to investors about the stability of TerraUSD and its integration with a Korean mobile payments app.
NEW YORK – Lawyers for the U.S. Securities and Exchange Commission (SEC) rested their case against Terraform Labs and its co-founder, Do Kwon, on Friday, releasing a New York jury to decide whether Kwon and his company are liable for allegedly misleading investors about the stability of Terra USD (UST) and its integration with a Korean mobile payments app.
The so-called “algorithmic stablecoin” was supposed to maintain a peg to the U.S. dollar through on-chain mint-and-burn mechanics with its sister token, LUNA. But in May 2022, the UST de-pegged and began a death spiral that eventually took down the entire Terra ecosystem, wiping out approximately $40 billion in market value in its wake.
During its case, the SEC argued that Kwon and, under his direction, Terraform Labs deceived everyday investors about the nature of that algorithm, implying that it allowed UST to “naturally heal” and “automatically self-heal” in the event of a de-peg.
But there was no self-healing or algorithmic magic that kept UST pegged to the dollar, the SEC argued. Instead, the value of UST was maintained through continuous trading activity, including large-scale trading done by institutional investors.
