A New York jury has found Terraform Labs and its Co-Founder, Do Kwon, guilty of deceiving investors about UST’s stability.
Terra’s stablecoin UST collapse in 2022 led to a $40 billion loss for investors and sent shockwaves through the cryptocurrency sector. The verdict emerged from a two-week trial, marking a significant win for the SEC in its endeavor to tighten oversight of the digital currency space.
This judgment may also hint at the outcomes of forthcoming criminal trials against Kwon in both the United States and South Korea, where the criteria for establishing guilt are more severe.
Kwon, who controls 92% of Terraform, was detained in Montenegro for using a counterfeit passport and faces extradition to either the U.S. or South Korea. Both nations are pursuing criminal fraud charges against him.
Kwon’s potential extradition has become more likely after a recent ruling by Montenegro’s Supreme Court, challenging previous decisions favoring his transfer to Seoul.
After deliberating for under two hours, the jury concluded that Kwon and his company made false claims regarding the use of Terraform’s blockchain technology by Chai, a widely used payment app in Korea.
Additionally, the verdict pointed out misleading information about the UST stablecoin’s stability, purported to maintain a consistent value pegged to the US dollar through algorithms.
Per the High Court decision, Do Kwon will be released from prison in Spuž on Saturday but will not be allowed to leave Montenegro.
As per local reports, the authorities will confiscate Kwon’s valid passport as a security measure. This decision follows the court’s need to address challenges raised by the Supreme State Prosecution Office regarding the process that led to the initial approval of Kwon’s extradition earlier in the month.
The prosecution’s objections relate to the procedure’s expedited nature and question the legal foundation of the court’s decision to extradite Kwon.
The pause in the extradition process allowed Kwon to be extradited to the United States, aligning with Montenegro’s authorities’ preferences. Kwon’s legal representatives have advocated for his return to South Korea, where the consequences for his alleged crimes are less severe compared to those in the United States.
The country’s lead prosecutor has pinpointed technical issues with how the court’s order for extradition was handled. This comes after the court reversed a prior decision to extradite Kwon to the United States for a civil trial related to fraud charges by the U.S. SEC, set to commence on March 25.
Kwon, alongside Terraform Labs, faces litigation by the SEC following the May 2022 collapse of the TerraUSD and Luna cryptocurrencies. The fallout is believed to have erased approximately $40 billion from the cryptocurrency market. He was arrested one year ago in Montenegro for traveling on a fake passport.
Amidst legal turmoil and Terraform Labs’ collapse, Do Kwon’s Serbian venture Codokoj22 remains active.
Terraform Labs, the company behind the $60 billion collapse in the crypto market, filed for Chapter 11 bankruptcy in the U.S. on January 21, nearly two years after its dramatic failure.
However, Codokoj22 d.o.o. Beograd, another venture by Terraform’s founder Do Kwon, remains active. Established in Serbia in 2022, while Kwon was evading an Interpol red notice, the company’s purpose remains unclear.
This Serbian enterprise called Codokoj22, co-founded with Han Chang Joon, is legally operational despite Kwon’s current legal predicaments. With a minimal investment of less than one dollar, the company is headquartered in Belgrade’s old town.
Screenshot of Do Kwon’s Serbian firm registration | Source: bisnode.rs
Interestingly, despite Kwon and Chang-Joon’s arrest and conviction for using false documents, Serbian law doesn’t mandate the dissolution of a business due to the legal status of its founders.
U.S. and South Korean authorities are seeking Kwon’s extradition from Montenegro to face fraud charges related to Terraform Labs‘ collapse. Despite this, Codokoj22 d.o.o. Beograd continues to function, owing to the absence of a voluntary liquidation process and the company’s compliance with Serbian business regulations.
The company’s survival hinges on its adherence to regulatory requirements, such as submitting financial statements. Missing two consecutive annual statements could trigger its deregistration, a situation yet to occur.
Kwon’s lawyer in Montenegro, Goran Rodic, stated he is unaware of Kwon’s intentions for the company. The future of Codokoj22 d.o.o. Beograd remains uncertain, as does the resolution of Kwon’s legal challenges across multiple jurisdictions.
LUNA, the native token of the Terra 2.0 blockchain, was among the many gainers in the past week positively affected by Bitcoin’s impressive rally toward the $35,000 mark.
According to data from CoinMarketCap, LUNA is up by 13.96% in the last seven days, providing some relief for investors who have had to endure the token’s bearish form in the previous weeks leading to this price rise.
As expected, LUNA’s current bullish form has now attracted much attention, with some analysts speculating there could be more gains in the coming weeks.
LUNA Could Double Its Value After Breaching Major Trendline, Analyst Says
In a post on X on Sunday, crypto analyst Captain Faibik shared with his 67,000 followers an intriguing bullish prediction on LUNA’s price trajectory.
Faibik, who claimed to not be a LUNA enthusiast, noted that the altcoin has recently broken a major bearish trendline and could potentially gain by 80-100%.
I may not be a fan of this coin, but I receive frequent Chart Requests for it.$LUNA has broken a Major trendline and could potentially see a bullish rally of 80-100%. 📈#Crypto#LUNA#LUNAUSDTpic.twitter.com/R9UEmxK2Bx
According to Faibik’s analysis, LUNA traded above $0.47 in the past week, breaching a bearish trendline that stretches as far back as January 2023 on the token’s daily chart.
Traditionally, trendlines are used by traders to connect several price points together and provide some insight into the potential direction of an asset’s price movement.
When an asset’s price moves out of an established trendline, as in the case of LUNA, it can be interpreted as an impending price reversal.
Since the start of 2023, LUNA has produced an overall negative price performance, losing over 63% of its value in the last 10 months. However, if Faibik’s prediction proves true, the popular altcoin could be on its way to a remarkable recovery.
At the time of writing, LUNA trades at $0.468 with a 0.70% decline in the last day. With an 80-100% price increase, this price could rise as high as $0.934 in the coming weeks.
Meanwhile, LUNA’s daily trading volume is currently down by 3.73% and valued at $48.67 million. With a market cap of $263.92 million, LUNA is ranked as the 117th largest cryptocurrency.
In other news, the Terra Community has recently passed governance proposal 4790 aimed at the active and aggressive development of the Terra ecosystem with resources provided by Terraform Labs.
Under this newly approved proposal, Terraform Labs, alongside Terra community partners, will explore opportunities to utilize non-LUNA capital in driving the growth of the project’s economy.
In addition, 125 million LUNA will be staked by a Terra community council to encourage and reward active network engagement, offer essential services to support the ecosystem, and guarantee equitable decentralization.
The legal fight between Terraform Labs and Citadel Securities over the 2022 UST stablecoin issue presents a complicated situation filled with accusations, calling for a careful and unbiased review to find out what really happened.
Citadel Securities is caught up in a legal issue with Terraform Labs, connected to the 2022 instability of the stablecoin UST. In a strong response to Terraform’s legal request, Citadel firmly denies having any part in the matter, calling the accusations a far-fetched conspiracy theory. This article aims to break down this complex legal situation, keeping a balanced view.
Citadel Securites has responded in scathing fashion to an effort by Do Kwon’s lawyers to serve a subpoena on them. Kwon/Terraform Labs are hunting for evidence of a Citadel role in the UST depeg of May 2022, based on tweets from @GiganticRebirth, among other leads pic.twitter.com/vfO1clO0xu
Terraform accuses Citadel and Jump Trading of working together to raise asset prices, a claim that Citadel strongly denies. Citadel’s legal response criticizes Terraform’s argument as baseless, pointing out its reliance on questionable social media posts and underlining that the time period Terraform is interested in is not relevant.
Citadel argues that Terraform’s legal move is just an attempt to shift blame away from itself, especially given the ongoing legal troubles Terraform is facing with the SEC and its former CEO, Do Kwon.
Citadel insists that it barely had anything to do with the cryptocurrencies in question, with its involvement totaling just $0.13 across two test transactions. This, Citadel says, clears it of any blame in the UST incident.
Additionally, Citadel claims to have given Terraform all the information it needed, showing that it did not really trade in the cryptocurrencies involved.
However, to fully understand this situation, we need to look at both sides. Citadel’s quick dismissal of the social media posts as ridiculous raises questions about what kind of evidence is needed in such complex cases.
While it’s important to avoid getting caught up in baseless conspiracy theories, we also need to make sure all possible leads are looked into, especially when the stability of digital currencies is at risk.
Citadel’s request for the court to punish Terraform adds another layer to this situation. If the court agrees, it could set a precedent that might scare other companies away from seeking legal help in similar cases, worried about having to pay a lot of money if they lose.
The luna price, which was trading as high as $100 per luna just last month, crashed to near zero this week—causing the algorithmic stablecoin UST to completely lose its peg to the U.S. dollar—amid a $1 trillion crypto crash that sent the bitcoin price down by over 20%.
Now, the chief executive of UST and luna developer Terraform Labs, Do Kwon, has pitched a revival plan that could see ownership in the network distributed across UST and luna holders—causing the luna price to surge over 1,000% as traders bet the project could recover.
Want to stay ahead of the market and understand the latest crypto news? Sign up now for the free CryptoCodex—A daily newsletter for crypto investors and the crypto-curious
The chief executive of Terraform Labs Do Kwon pitched a “revival plan” for luna and the algorithmic … [+] stablecoin UST following the blockchain ecosystem’s collapse.
“While UST has been the central narrative of Terra’s growth story over the last year, the Terra ecosystem and its community is what is worth preserving,” Kwon wrote in a post on a Terra discussion forum, adding the Terra community “must reconstitute the chain to preserve the community and the developer ecosystem.”
The reconstitute—effectively a restart of the terra blockchain—would create 1 billion tokens to be distributed among various community stakeholders, with 40% going to luna holders before the UST de-pegging, 40% to go to UST holders “pro-rata at the time of the new network upgrade,” 10% to luna holders before the chain halt, and 10% to the “Community Pool to fund future development.”
The blockchain underpinning luna and UST was shut down multiple times this week to “prevent governance attacks” following “severe [luna] inflation.”
Terraform Labs and the Luna Foundation Guard, tasked with supporting UST, this week printed several billion luna tokens—increasing the luna supply from 340 million last week to 6.5 trillion—in a failed attempt to maintain the UST peg to the dollar.
The luna price has fallen by almost 100% over the last week, sparking a bitcoin and crypto crisis.
Coinbase
“Terra needs a community to continue to grow and make its blockspace valuable again—the only way to do this is to make sure that token holders before the attack commenced, the most loyal community members and builders, stick around to keep providing value,” Kwon wrote, adding, the ecosystem will not survive “in its current state.”
In a follow-up tweet thread, Kwon said he’s “heartbroken” about the collapse of luna and UST but said he’s confident the “community will form consensus around the best path forward for itself and find a way to rise again.”
Others in the crypto community have also suggested the project could still survive in some form with Binance chief executive Changpeng Zhao, often known simply as CZ, saying there has been “progress” made.
“Luna blockchain resumed, no more minting,” CZ posted to Twitter. “And deposits, withdrawals and trading resumed. Trading is important for existing holders.”
The luna and UST collapse this week came amid a bitcoin, ethereum and wider crypto market downturn that made UST vulnerable, with some speculating there may have been an orchestrated attack on the stablecoin.
“The pullback in general markets created the conditions for an attack on UST, which was inherently fragile,” Cory Klippsten, the founder and CEO of bitcoin-buying app Swan Bitcoin, said in a Telegram message, adding, “the effects of the unwind are wide reaching, and the ultimate magnitude still unknowable.”
