- Recent jury verdict holds Terraform Labs liable for civil fraud, complicating the ongoing legal dispute.
- Collapse of the IHR in 2022 impacts Terra’s stability, contributing to the uncertainty surrounding its future.
In the ongoing legal dispute between Terra (LUNA) and theSEC, attorneys representing Terraform Labs are vigorously contesting the SEC’s demand for billions of dollars in fines.Â
The SEC alleges that Terraform Labs, through its token sales, targeted U.S. investors, warranting a substantial $5.3 billion penalty, primarily in damages. However, Terraform’s legal team rebuffs this assertion, emphasizing that the majority of token sales occurred outside the United States.
Read more: SEC Proposes Massive Penalties: Terraform Labs Braces for Legal and Financial Fallout
The SEC’s claim of targeting U.S. investors is met with skepticism by Terraform’s lawyers, who contend that the agency has failed to provide evidence linking the company’s limited activities within the United States to substantial losses. This rebuttal underscores the complexity of the legal battle and the high stakes involved for both parties.
In February 2023, the SEC began its engagement with Terraform Labs, initiating charges against the firm and its co-founder, Do Kwon. These charges pertained to the algorithmic stablecoin Terra USD (UST). The SEC’s intervention followed the preceding year’s collapse of the IHR, a notable event in the cryptocurrency realm.Â
Recently, a jury delivered a verdict, holding Terraform Labs and Kwon responsible for deceiving investors and subjecting them to civil fraud charges, further complicating the legal proceedings.
Algorithmic stablecoins like UST, intricately designed to maintain a stable price through market incentives, play a pivotal role in the cryptocurrency sector.
Terra, linked to Luna, a governance token aimed at price stabilization, was affected by the IHR collapse in May 2022, resulting in substantial losses exceeding $50 billion.
