According to a report byReutersNew York jury finds Terraform Labs and its founderGwondoOn Friday, he was charged with civil fraud by the U.S. Securities and Exchange Commission (SEC).
Kwon Do-kwon and civil fraud verdict
The SEC accused Terraform Labs and Kwon of defrauding investors by misrepresenting the stability of its stablecoin TerraUSD and promoting unsubstantiated claims. Terra's collapse resulted in losses approaching $40 billion and was highlighted as a significant catalyst for the broader downturn in cryptocurrency markets.
According to Reuters, the decision was made in federal court immediately after the final argument after a two-week trial. The SEC aims to impose civil monetary penalties and obtain an injunction barring Kwon and Terraform from participating in the securities industry. The collapse of TerraUSD and its related token Luna in May 2022 resulted in losses exceeding $40 billion and sparked widespread upheaval in cryptocurrency markets.
Major legal decisions related to Luna and UST
Mr. Kwon, who was detained in Montenegro in March 2023, did not appear at trial. Both the United States and South Korea have requested his extradition to face criminal charges. Terraform Labs filed for bankruptcy protection in January.
The SEC alleged that a secret third party orchestrated a secret agreement between Kwon and Terraform to purchase significant amounts of TerraUSD in May 2021 to maintain the dollar peg. Mr. Kwon is known to have falsely acknowledged the restoration of TerraUSD's algorithmic reliability. Additionally, regulators alleged that Kwon and Terraform inaccurately promoted the use of blockchain in Chai, a well-known payment application in South Korea.
Lawyers representing Terraform Labs and Kwon argued that the companies have consistently maintained transparency about their products and features even amidst failures. They argued that the SEC's case was built on statements that were misinterpreted and taken out of context.
The company's legal representation previously sparked controversy when the SEC criticized a $166 million fund earmarked for the company's lawyers as a “slush fund.” In response, the attorneys characterized the SEC's actions as “a troubling example of government overreach,” arguing that they aimed to “disadvantage and distract” the SEC from addressing the merits of the case.
Last December, an important aspect of the case became clear when a federal judge ruled that Luna and UST (TerraUSD) were considered securities and subject to registration and other financial regulations.
Will LUNC price fall to $0?
Civil fraud charges against Terraform Labs and Do Kwon, along with the decision that Luna and UST (TerraUSD) are regulated securities, have injected uncertainty into the future of cryptocurrencies.
The collapse of TerraUSD and its related token Luna, which resulted in significant losses exceeding $40 billion and sparked widespread upheaval in cryptocurrency markets, highlights the fundamental risks. Regulatory scrutiny and legal challenges facing Terraform Labs and Kwon raise concerns about Luna's stability and viability.
Additionally, Kwon Do-kwon's absence from court following his detention and extradition request to face criminal charges further complicated the outlook for Terraform Labs and its related assets. Legal and regulatory actions could potentially impact investor confidence and market sentiment surrounding Luna.
Based on recent performance indicators and market trends, traders should approach LUNC with caution due to several concerning factors. First, LUNC has underperformed 79% of the top 100 cryptocurrency assets over the past year, indicating relative weakness within the broader cryptocurrency market. It is important to note that LUNC has been outpaced by major cryptocurrencies such as Bitcoin and Ethereum, which have shown stronger price momentum and market dominance.
Moreover, LUNC is currently trading below its 200-day simple moving average, suggesting a bearish trend and possible downward price pressure. The recent poor performance is highlighted by only 13 green trading days out of the last 30, representing a positive trading frequency of 43%. Additionally, LUNC prices have fallen sharply by 100% from their all-time highs, indicating significant losses and a difficult recovery trajectory.
Considering these observations, traders should exercise caution and consider implementing a risk management strategy when trading LUNC. Ongoing legal and regulatory uncertainty surrounding Terraform Labs and the broader cryptocurrency market environment requires careful monitoring and due diligence.