Do Kwon designed TerraUSD and Luna, a more traditional token that fluctuated in value but was closely linked to TerraUSD.NEW YORK — A jury in Manhattan found Singapore-based Terraform Labs and its founder Do Kwon liable on civil fraud charges on April 5, agreeing with the US Securities and Exchange Commission that they misled investors before their stablecoin's 2022 collapse shocked cryptocurrency markets.
The regulator also accused them of falsely claiming Terraform's blockchain was used in a popular Korean mobile payment app. Louis Pellegrino, an attorney for Terraform, told the jury on April 5 the SEC's case relied on statements taken out of context and that Terraform and Kwon had been truthful about their products and how they worked, even when they failed.The regulator is seeking civil financial penalties and orders barring Kwon and Terraform from the securities industry.
The SEC estimates investors lost more than US$40 billion on the two tokens combined when the TerraUSD peg to the dollar could not be maintained in May 2022.Their collapse also dragged down the value of other cryptocurrencies, including bitcoin, and caused wider havoc in the crypto market, leading several companies to file for bankruptcy in 2022.
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