Terraform Labs CEO Kwon found liable for fraud in SEC case

Kwon Do-hyung, the mastermind behind the Terra-Luna crypto crash and founder of Terraform Labs, has suffered a significant blow. He lost a civil case brought against him by a U.S. securities authority, a verdict that could potentially impact a looming criminal trial in the United States.

The jury in the U.S. District Court for the Southern District of New York, in agreement with the U.S. Securities and Exchange Commission (SEC), found Kwon and Terraform Labs guilty of deceiving investors. They were led to believe that the Terra crypto was a secure asset, resulting in significant financial losses. The civil lawsuit, filed in 2021, accused Kwon of misleading investors with false information about the security of the Terra crypto, leading to losses of approximately 40 billion dollars.

The court decision was made in a civil trial filed separately from a criminal lawsuit. Kwon has been detained in Montenegro in the Balkans of Eastern Europe since last March, so a default judgment was held as it does not require the defendant's appearance.

Since Kwon was caught in Montenegro, South Korea and the United States have vied for the extradition of Kwon. The Montenegro court first decided to return him to South Korea, but the appellate court overturned it to repatriate him to South Korea. However, the Supreme Court of Montenegro scrapped the decision, increasing the chances of sending him to the United States. Reportedly, Kwon hopes to return to his home country, where financial crooks face a relatively less severe sentence.

When Terraform Labs was launched in 2018, Kwon issued the Terra and Luna cryptocurrencies, which were designed to be worth one dollar per coin. The SEC claimed that Kwon got involved in market manipulation by ordering third-party investors to buy a large amount of the Terra crypto to drive up its value, which went below one dollar in May 2021. It argued that Kwon and Terraform Labs are supposed to pay a massive sum of punitive damages and return their illegal profits as well.


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