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SEC Vs TerraForm: ‘House OF Card’ Fraud Allegation Kick start, Judge Reluctant, Here Is Why

The main day of the eagerly awaited court session between the U.S. Security and Exchange Commission (SEC) and Do Kwon and TerraForm Labs has started. On the 25 of this month, the US District Court for the Southern District of New York circumspectly inspected the cases alleging that Kwon organized a deceitful third-party purchase during the 2021 TerraUSD (UST) depeg.

Read Also: Terra Classic Bearish Sentiment Dominant Amidst 13% Surge In LUNA

May 29, 2021, stood out in history as one of the most troublesome days for the crypto space when UST dropped to below 3 cents from its original $1 peg. The SEC pointed an accusation to Kwon and fellow TerraForm Labs leaders of artificially expanding TerraForm Ecosystem trading volume and setting up UST’s market value. The SEC initially accused TerroForm of a case bothering-on customer defrauding in February 2023.

Is ‘House Of Card’ A Ticking Bomb Destined To Explode?

During the hearing, the SEC opened by saying, “This is a case about fraud. This trial is not about technology.” To that, Do Kwon’s attorney clarified the smart contract mistake that led to the $40 billion crypto crash in May 2021.

The SEC’s lawyer, Devon Staren, mentioned that Terra’s Ecosystem was a “House Of Cards,” stating that it is a ticking bomb bound to collapse. For proof, the SEC utilized Slack chat logs between Kwon and Daniel Shin, among other Terra fellow founders.

Nonetheless, Judge Jed Rakoff reproached the SEC’s claim that TerraForm Labs participated in “illicitly offering security-based swaps through a feature that let users create digital assets that mirrored the price of another asset”.

This resonates with the summary judgment by Judge Rakoff which was published in December 2023, where he favored Kwon’s defense lawyer on the security-based swaps yet conceded the SEC with a partial win because of preliminary evidence that TerraForm Labs sold crypto assets as unregistered security.

Read Also: Terra Classic (LUNC) and USTC Surge on News of Do Kwon’s Release

Actions Behind The Final Verdict

As the House Of Cards unfurls without Do Kwon being present because of his long-term stay in Montenegro, Judge Rakoff has decided to refrain from giving a final verdict on the case. All things considered, a fourteen-day deadline has been given for a decision. In the Lawsuit, the SEC is looking for Terra’s civil financial punishments and barring Kwon and Terraform Labs from the security industries.

Following the legal examination in Manhattan, the CEO of the current TerraForm Labs, Chris Amani, rang in to encourage his devotees to watch out for the realities that unfurl in the court.
According to Amani:
“There have been a lot of allegations, and this is our chance to finally tell our side of the story”, deal of claims, and this is our opportunity to at last recount our side of the story.”
featuring the two weeks ahead as a make-or-break period for TerraForm Labs’ future.


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