(Reuters) – In a trial on allegations that the Singapore-based company and its founder, Do Kwon, misled investors about the stability of TerraUSD, a stablecoin intended to maintain a value of $1 la, the Exchange Commission accused Terraform Labs and Kwon of deceiving investors in 2021. The attorneys for the two men are scheduled to make closing arguments on Friday.
The regulator also accused them of falsely claiming that Terraform’s blockchain was used in a popular South Korean mobile payment app. Lawyers for Terraform and Kwon previously argued to the jury that the SEC took statements out of context and relied on witnesses in an attempt to obtain payments from whistleblowers if the SEC success.
The regulator is seeking civil financial penalties and an injunction banning Kwon and Terraform from the securities industry. Kwon, who was arrested in Montenegro in March 2023, did not attend the trial that began on March 25. The United States and South Korea, where Kwon is a citizen, have requested his extradition on the charges Criminal. Kwon designed TerraUSD and Luna, a more traditional token whose value fluctuates but is closely related to TerraUSD.
The SEC estimates that investors lost more than $40 billion on the two tokens combined when TerraUSD’s dollar peg was not maintained in May 2022. Their collapse also reduced the value of other cryptocurrencies, including bitcoin, and wreaked more havoc on the cryptocurrency market, causing several companies to file for bankruptcy in 2022. The SEC says Kwon and Terraform secretly arranged to have a third company .
According to the regulator, a group bought a large amount of TerraUSD to support the price when the stablecoin slipped from its peg a year earlier, in May 2021. Kwon wrongly attributed the recovery to the cryptocurrency’s reliability TerraUSD algorithms. The SEC also said Kwon and Terraform falsely advertised that Terraform’s blockchain was used to process and settle transactions between customers and merchants on the Chai payments app.