SEC Alleges Terraform Labs Was ‘Built on Lies’

As the trial between Terraform Labs and the United States Securities and Exchange Commission (SEC) nears its conclusion, attorneys representing the SEC have alleged that the crypto firm disseminated several false claims about its platform to investors.

According to a report by Reuters on April 5, SEC lawyers asserted in the U.S. District Court for the Southern District of New York that Terraform’s narrative was “built on lies.” 

In a previous report, TheCoinRise confirmed that Terraform Labs Chief Financial Officer, Han Chang-joon, was arraigned in South Korea on charges related to fraudulent marketing practices involving the TerraUSD stablecoin.

SEC vs. Terraform Labs

These purported falsehoods included misrepresentations about the stability of the algorithmic stablecoin TerraUSD (UST) and an alleged integration with a South Korean payment app. 

In response, Terraform’s attorney, Louis Pellegrino, contended that co-founder Do Kwon had been truthful in his public statements and argued that the SEC’s case relied on information taken out of context.

A Multi-Billion Dollar Crypto Fraud

The civil trial with the SEC commenced more than a year after the commission filed a lawsuit against Terraform in February 2023, accusing the platform and Kwon of orchestrating a “multi-billion dollar crypto asset securities fraud.”

Throughout the trial, SEC lawyers likened Terra to a “house of cards” that collapsed for investors in 2022, contributing to a significant downturn in the crypto market that affected entities such as FTX, BlockFi, and Celsius, which were compelled to declare bankruptcy.

Do Kwon’s Whereabouts

Notably, the trial has progressed in the absence of Kwon, who remains in Montenegro. Courts are deliberating whether to grant an extradition request from the U.S. or South Korea for Kwon, who was arrested in March 2023 for using falsified travel documents.

More importantly, authorities have accused Kwon of withdrawing millions from his own company, and South Korean prosecutors are trying to freeze his and other parties’ assets.

Start of the SEC and Terraform Lawsuit

In January, Judge Jed Rakoff rescheduled the start date of the SEC v. Terraform Labs trial to March 25 to accommodate Kwon’s situation. 

Other prominent figures in the crypto space have also faced legal proceedings in the U.S., including former Celsius CEO Alex Mashinsky, who underwent a criminal trial in January 2025, and former Binance CEO Changpeng Zhao, who is scheduled for a sentencing hearing on April 30. Notably, Zhao, the co-founder and former CEO of Binance, exited his role as the chief executive of the firm, following a series of investigations.