Terraform Labs was ‘built on lies’ — SEC at trial

As the trial between Terraform Labs and the United States Securities and Exchange Commission (SEC) approaches the finish line, attorneys alleged the crypto firm made several false claims regarding the platform to investors.

According to an April 5 Reuters report, SEC lawyers said in U.S. District Court for the Southern District of New York that Terraform‘s story was “built on lies,” which included the stability of algorithmic stablecoin TerraUSD (UST) and an integration with a South Korean payment app. Terraform attorney Louis Pellegrino reportedly claimed co-founder Do Kwon had been truthful in public statements, and the SEC’s case relied on information taken out of context.

The civil trial with the SEC came more than a year after the commission filed a lawsuit against Terraform in February 2023. The regulator alleged at the time that the platform and Kwon “orchestrat[ed] a multi-billion dollar crypto asset securities fraud.”

During the trial, SEC lawyers compared Terra to a “house of cards” that collapsed for investors in 2022. The failure of Terra contributed to a major crypto market downturn that engulfed FTX, BlockFi, Celsius and others forced to file for bankruptcy.

The trial has been moving forward without Kwon attending in person. The Terraform co-founder remains in Montenegro as the courts determine whether to grant an extradition request from the U.S. or South Korea. He was arrested in March 2023 for using falsified travel documents.

In January, Judge Jed Rakoff moved the start date of the SEC v. Terraform Labs trial to March 25 in an attempt to accommodate Kwon. Other major figures in the crypto space going to court in the U.S. include former Celsius CEO Alex Mashinsky for his criminal trial in January 2025 and former Binance CEO Changpeng Zhao for an April 30 sentencing hearing.