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.
. If the value of UST were ever to diverge from $1, traders would theoretically be incentivized to either buy or sell the stablecoin until the target value was restored. At the height of its popularity, in early 2022, was among the 10 largest cryptocurrencies in the world by the combined value of coins in circulation—and UST wasn’t far behind. “It was an intriguing and very novel mechanism,” says Acheson. “Many smart people believed it would work.” In May 2022, it all went wrong. When holders of large amounts of UST sold the token in bulk, it slipped from its dollar peg, leading to panic and a broader sell-off that drove the price practically to zero.
and Terraform’s other coins were decimated along with it. “The mechanism was based on the faulty assumption that people would want it to self-correct and therefore it would,” says Acheson. “ made marketing claims about the stability of stablecoins that weren’t true.” The incident sent crypto markets into a downward spiral and catalyzed a chain reaction that brought a string of crypto companies to their knees.
, and other Terraform tokens as securities—a specific class of financial instrument from which investors expect to profit—and, therefore, lacked jurisdiction. The debate over the appropriate classification of crypto is central to multiple ongoing legal disputes in the US, between the SEC and Ripple, Coinbase, and other firms.
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