The United States Securities and Exchange Commission (SEC) has accused Terraform Labs of creating its platform with deceitful claims. Lawyers for the SEC argued that the crypto firm misled investors by spreading false information about their operations. As reported by Reuters on April 5, the SEC claimed that Terraform's narrative was constructed based on falsehoods.

Previous reports also revealed that Terraform Labs' Chief Financial Officer, Han Chang-joon, faced legal issues in South Korea linked to fraudulent marketing involving the TerraUSD stablecoin. The SEC cited misrepresentations about the stability of TerraUSD and an alleged partnership with a South Korean payment app as part of Terraform's deceptive practices.

In response to these allegations, Terraform's attorney, Louis Pellegrino, defended co-founder Do Kwon's public statements as truthful. Pellegrino argued that the SEC had misconstrued information to build its case against Terraform.

The SEC filed a lawsuit against Terraform Labs in February 2023, accusing the platform and Kwon of conducting a massive fraud scheme involving crypto assets. Throughout the trial, the SEC likened Terraform to a fragile structure that collapsed in 2022, causing significant losses to investors and affecting other crypto entities like FTX, BlockFi, and Celsius.

The legal proceedings have continued without Kwon's presence as he remains in Montenegro. While courts deliberate on extradition requests from the U.S. and South Korea, Kwon faces allegations of funds withdrawal and asset freezing by South Korean authorities. The trial's start date was rescheduled to accommodate Kwon's situation, with other notable crypto figures facing legal actions in the U.S., such as former Celsius CEO Alex Mashinsky and former Binance CEO Changpeng Zhao.