Terraform Labs, a Singapore-based startup focusing on blockchain protocol and payment systems, has finally settled with the American Securities and Exchange Commission; the SEC filed a case against Terraform Labs for misleading the cryptocurrency investment fraternity. The information about the legal fight was recently published on a court website, and Terraform and its founder were charged with fraud in April 2024. According to the SEC, Terraform Labs misled the investor community about the stability of TerraUSD, a stablecoin with the Terra platform.
The American financial regulatory authority said that Terraform Labs falsely claimed its blockchain was used in an iconic Korean mobile payment application. The US judicial officer requested the Securities and Exchange Commission and the defendants to file documents in support of the settlement by 12th June 2024. The spokesperson of the Securities and Exchange Commission and advocates for the accused were not available for comment. The downturn of TerraUSD and Luna, a conventional token connected to TerraUSD, drastically affected the crypto market in 2022.
According to the estimates of the SEC, crypto investors lost more than a combined amount of $40 billion. The Securities and Exchange Commission directed Terraform Labs to relinquish $5.3 billion as profit obtained from stablecoin sales. The founder of Terraform Labs had faced criminal charges in the USA and his home country, South Korea, although he denied accusations of any wrongdoing. The top official of Terraform Labs has been awaiting extradition from Montenegro since his arrest in 2023. Media reports indicate that serious criminal charges against Terraform Labs and its chief remain pending.
The terms and conditions of the settlement between the SEC and Terraform Labs have not been disclosed even now. The SEC had earlier imposed a ban on Terraform Labs from dealing with cryptocurrency asset securities, and the attorneys of Terraform Labs questioned the validity of the ruling in court. The initial ruling drew criticism for the lack of conclusive pointers and strong reasons to back it.
The court must ensure that the Terraform founder’s consent to extradition is voluntary and irrevocable. In his absence, the American court expressed its willingness to prosecute the Terraform founder. Information about the whereabouts of the Terraform Labs founder was not available, and this was followed by the collapse of TerraUSD and Luna way back in 2022.
It is unclear whether Do Kwon, the founder of Terraform Labs, will be sent to the USA or South Korea. The new legal twist is a milestone in addressing one of the most catastrophic collapses ever in the crypto market. It reaffirms the commitment of the Securities and Exchange Commission to taking strong legal action against malpractices and fraudulent measures in the crypto industry. The high-voltage legal drama between the SEC and Terraform Labs is expected to end very soon. There was a spike in the Luna token value after the settlement announcement came out.
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