After a nine-day trial, a jury found Terraform Labs and its co-founder Do Kwon accountable for deceiving investors who suffered massive losses when TerraLUNA collapsed in 2022. The SEC revealed the verdict on April 5, highlighting that it holds both parties responsible for a "massive crypto fraud" that led to "devastating losses for investors" and resulted in the overnight destruction of $40 billion in market value.

While the SEC has yet to impose penalties or injunctions on Terraform Labs, the company rejected the verdict and the lawsuit's premise, claiming the SEC lacked legal authority to bring the case. Terraform Labs also stated its intention to appeal the ruling.

For Kwon, the jury verdict establishes civil liability but not criminal guilt. He faces separate criminal charges in the US and South Korea for his role in Terra's collapse. Although a federal judge postponed the SEC civil trial to allow Kwon's attendance, his extradition from Montenegro remains uncertain. Montenegro's Supreme Court recently blocked the extradition process again and sent it back for reevaluation, despite previously ruling in favor of extradition to both the US and South Korea.

The SEC case stems from the collapse of Terraform Labs' TerraUSD stablecoin in May 2022, which not only caused immediate losses but also triggered a broader liquidity crisis due to TerraUSD's pivotal role in the crypto lending market. The post-TerraUSD market crash continued for months, with Bitcoin prices falling from $35,000 in May to less than $20,000 in November. While the SEC obtained a subpoena against Terraform Labs during the crisis in June 2022, it did not file its complaint until February 2023. Before the latest verdict, a December 2023 ruling had already found that Kwon and Terraform Labs violated the Securities Act of 1933.