Image credit: SAVO PRELEVIC / AFP
Do Kwon, the co-founder of Terraform Labs, is set to face fraud charges in the United States after being found liable for a multibillion-dollar cryptocurrency fraud scheme. Kwon and his company were accused by the U.S. Securities and Exchange Commission (SEC) of misleading investors regarding the stability of their algorithmic stablecoin, TerraUSD (UST).
The SEC alleged that Terraform Labs and Kwon provided false assurances about the ability of UST to maintain its $1 peg without intervention. It was revealed that Kwon secretly arranged for a trading firm, Jump Trading, to prop up UST’s value, misleading investors into believing the token was self-sustaining.
Another key allegation involved Terraform’s partnership claims with the Korean payments platform Chai, where Kwon purportedly faked transaction data to make it appear that the technology was widely adopted.
Following the collapse of Terraform’s ecosystem in May 2022, which wiped out over $40 billion in investor value, Kwon fled Singapore and traveled through Dubai and Serbia before being arrested in Montenegro for attempting to leave with falsified documents. He served a four-month sentence there and is now expected to face trial in the U.S.
Legal experts have noted that this case highlights the broader debate over whether cryptocurrencies should be classified as securities. Terraform Labs has signaled its intent to appeal the verdict, challenging the SEC’s authority to regulate cryptocurrencies.
The outcome of this case could set a significant precedent for future crypto regulations and enforcement in the United States .