Do Kwon will go on trial in Manhattan on Monday

Author: Jody Godoy, Reuters; Compiler: Deng Tong, Golden Finance

Terraform Labs and its founding Do Kwon will go on trial in Manhattan on Monday on charges that regulators lied to investors ahead of the collapse of two of the company's cryptocurrencies, which roiled markets in 2022.

The U.S. Securities and Exchange Commission accused Kwon and the Singapore-based blockchain company of misleading investors in 2021 about the stability of TerraUSD, a stablecoin designed to maintain the value of $1. Regulators also accuse them of falsely claiming that Terraform’s blockchain was used in a popular mobile payment app in South Korea.

Kwon will not attend the hearing. He was arrested in Montenegro last March and is awaiting extradition to his native South Korea, where he faces criminal charges. A Montenegrin court on Friday postponed his extradition after the country's prosecutor's office raised concerns about the process.

Federal prosecutors in New York have also charged Quan with fraud and are seeking his extradition to the United States.

Kwon designed TerraUSD and Luna, a more traditional token whose value fluctuates, but Closely related to TerraUSD.

The SEC estimates that due to the inability to maintain TerraUSD in May 2022 Pegged to the U.S. dollar, investor losses in the two tokens totaled more than $40 billion.

Their collapse also dragged down other cryptos including Bitcoin currency and caused broader disruption to the crypto market, leading multiple companies to file for bankruptcy in 2022.

SEC stated that Kwon and Terraform secretly arranged for third parties to purchase large amounts of TerraUSD, To support the price of the stablecoin when it left its peg a year ago (in May 2021). The regulator said Kwon mistakenly attributed the price recovery to the stablecoin’s reliability, TerraUSD’s algorithm.

The SEC also claims that Kwon and Terraform falsely promoted Terraform's blockchain Used to process and settle transactions between customers and merchants on the Chai payment application.

Kwon and Terraform deny wrongdoing and say the SEC viewed statements by Kwon and other Terraform employees out of context.

The SEC is seeking civil monetary penalties and an order barring Kwon and Terraform from entering the securities industry.

In December, U.S. District Judge Jed Rakoff granted the SEC partial victory, ruling that Terraform Labs illegally sold digital assets without registering them as securities.

A judge dismissed the SEC’s charge that Terraform and Kwon illegally offered security-based swaps through a feature that allowed users to create prices that reflected another asset, such as a different cryptocurrency or stock. digital assets.

A judge has not yet determined the amount of damages Terraform must pay, but the company filed for bankruptcy protection in January and said the fine could exceed its assets.