A jury in Manhattan found Singapore-based Terraform Labs and its founder Do Kwon liable on civil fraud charges on Friday, agreeing with the US Securities and Exchange Commission that they misled investors before their stablecoin’s 2022 collapse shocked cryptocurrency markets. The jury delivered the verdict in federal court in the two-week trial after hearing closing arguments earlier in the day. The SEC accused the company and Kwon of misleading investors in 2021 about the stability of TerraUSD, a stablecoin designed to maintain a value of $1. The regulator also accused them of falsely claiming Terraform’s blockchain was used in a popular Korean mobile payment app. Kwon designed TerraUSD and Luna, a more traditional token that fluctuated in value but was closely linked to TerraUSD. The SEC has estimated that investors lost more than $40 billion on the two tokens combined when the TerraUSD peg to the dollar could not be maintained in May 2022. The SEC is seeking civil financial penalties and orders barring Kwon and Terraform from the securities industry. US District Judge Jed Rakoff will consider penalties in the coming weeks after hearing from the SEC and the defendants. A spokesperson for Terraform said the company is disappointed by the verdict and weighing its options. “We continue to maintain that the SEC does not have the legal authority to bring this case at all,” the spokesperson added. SEC Division of Enforcement Director Gurbir Grewal said the agency is pleased with the verdict. “For all of crypto’s promises, the lack of registration and compliance have very real consequences for real people,” Grewal said, adding, “it is high time for the crypto markets to come into compliance.” A lawyer for Kwon declined to comment. The collapse of TerraUSD and Luna dragged down the value of other cryptocurrencies, including bitcoin, and caused wider havoc in the crypto market, leading several companies to file for bankruptcy in 2022. Terraform filed for bankruptcy protection in January. Kwon, who was arrested in Montenegro in March 2023, did not attend the trial, which began on March 25. Both the United States and South Korea, where Kwon is a citizen, have sought his extradition on criminal charges. SEC attorney Laura Meehan told jurors during closing arguments that the platform’s success story was “built on lies.” “If you swing big and you miss, and you don’t tell people that you came up short, that is fraud,” Meehan said. The SEC has said Kwon and Terraform secretly arranged to have a third party purchase large amounts of TerraUSD to prop up the price when the stablecoin slipped from its peg a year earlier, in May 2021. Kwon falsely attributed the recovery to the reliability of TerraUSD’s algorithms, according to the regulator. The SEC also has said Kwon and Terraform falsely touted Terraform’s blockchain as being used to process and settle transactions between customers and merchants on the Chai payment app. Louis Pellegrino, an attorney for Terraform, said in closing arguments that the SEC’s case relied on statements taken out of context and that Terraform and Kwon had been truthful about their products and how they worked, even when they failed. “Terraform is still out there, trying to rebuild and make purchasers whole,” Pellegrino said. Earlier in the case, Terraform argued that securities laws did not apply to the cryptocurrencies it developed. Rakoff rejected that argument in December, ruling that Terraform unlawfully sold digital assets without registering them as securities. After a final judgment in the case, Terraform will be able to challenge that ruling on appeal.