Attorneys involved in the trial between Terraform Labs and the United States Securities and Exchange Commission (SEC) have accused the crypto firm of making false claims about its platform to investors. The SEC lawyers argued in the U.S. District Court that Terraform’s narrative was based on lies, including the stability of its algorithmic stablecoin TerraUSD (UST) and its integration with a South Korean payment app. In response, Terraform attorney Louis Pellegrino stated that co-founder Do Kwon had been truthful in his public statements and that the SEC’s case relied on information taken out of context.
The civil trial with the SEC began over a year after the commission filed a lawsuit against Terraform in February 2023. At that time, the regulator alleged that the platform and Kwon had orchestrated a multi-billion dollar crypto asset securities fraud. During the trial, SEC lawyers compared Terra to a “house of cards” that collapsed in 2022, causing significant losses for investors. This failure also contributed to a broader crypto market downturn that led to the bankruptcy filings of FTX, BlockFi, Celsius, and other companies.
Notably, Kwon has not been physically present for the trial as he remains in Montenegro. The courts are currently considering whether to grant an extradition request from the U.S. or South Korea. Kwon was arrested in March 2023 for using falsified travel documents. In an attempt to accommodate Kwon, Judge Jed Rakoff postponed the start date of the trial to March 25. Other prominent figures in the crypto industry, such as former Celsius CEO Alex Mashinsky and former Binance CEO Changpeng Zhao, have also faced legal proceedings in the U.S.
The concerns and uncertainties of lawmakers have been driving proposed crypto regulations in the U.S., as evidenced by the ongoing trial between Terraform Labs and the SEC.