Crypto Magnate Do Kwon Found Liable for Multibillion-Dollar Fraud

A federal jury in New York has found South Korean crypto magnate Do Kwon—and his company Terraform Labs—liable for defrauding investors who collectively sank billions of dollars into cryptoassets whose value later fell to near zero.

Filed in February 2023 by the Securities and Exchange Commission, a regulatory body responsible for protecting US investors, the civil complaint alleged that Kwon and Terraform had “perpetrated a fraudulent scheme that led to the loss of $40 billion of market value,” whereby they lied to investors about the prospects and stability of the cryptotokens they issued.

Kwon, who went into hiding after the tokens crashed in 2022, is facing criminal charges in the United States and South Korea. He was recently released on bail from a prison in Montenegro, where he was arrested last year and awaits extradition.

In Kwon’s absence, the jury in the US civil trial in the Southern District of New York heard evidence from investors who bought into Terraform tokens, whistleblowers from companies with which Terraform partnered, and other witnesses. After a deliberation lasting less than two hours, the jury found Kwon and Terraform liable on civil fraud charges related to making false claims and misleading investors in Terraform’s cryptotoken.

“We are pleased with today’s jury verdict holding Terraform Labs and Do Kwon liable for a massive crypto fraud,” said SEC Division of Enforcement Director Gurbir S. Grewal in a statement. “For all of crypto’s promises, the lack of registration and compliance have very real consequences for real people.”

The resolution of Kwon’s civil trial—along with the recent sentencing of Sam Bankman-Fried, founder of fallen crypto exchange FTX—will help to draw a line under a traumatic period for the crypto industry, says market analyst Noelle Acheson, formerly of crypto brokerage Genesis Trading. “Many feel hurt by what Do Kwon did. Those that invested feel betrayed,” she says. “Hopefully, people will be reminded to do more homework and ask better questions, to avoid getting drawn into rather flimsy claims again.”

Kwon started Terraform in 2018, alongside cofounder Daniel Shin. By 2020, the company announced plans to launch