Singapore court orders Terraform, Do Kwon to pay $3M for fraud

The Singapore International Commercial Court on June 29 found Terraform Labs and co-founder Do Kwon liable for fraudulent misrepresentations about the TerraUSD stablecoin, awarding more than $3 million to 40 claimants in the second tranche of a case brought by 275 investors.

"The defendants made false representations that UST was a stablecoin capable of reliably maintaining its one-dollar peg through its algorithm, reserves, and LUNA-based arbitrage mechanism," the court said in its ruling, which found those statements appeared on Terraform's website, white papers, and public communications despite being false or made with reckless disregard for their accuracy.

The award concludes the second compensation phase of the lawsuit. The court calculated damages based on how much UST each plaintiff held and when they held it, applying a revised cut-off valuation of about $0.60485 per UST set by the Singapore Court of Appeal in March 2026. Holdings after May 12, 2022 were deemed too speculative for compensation. The original lawsuit stems from the May 2022 de-pegging of UST, which erased about $40 billion in market value and triggered a broader crypto market downturn.

The ruling adds to Terraform's mounting legal challenges as the company navigates Chapter 11 bankruptcy proceedings in the United States, where claims reconciliation for creditors remains ongoing. Do Kwon, who was sentenced to 15 years in prison after pleading guilty to fraud charges in the US, also faces criminal proceedings in South Korea. The SICC's decision may influence other pending litigation against Terraform Labs and set a precedent for future fraud cases involving digital assets, while regulators in multiple jurisdictions continue to push for stronger disclosure standards for stablecoin and decentralized finance products.

Earlier this year, Terraform's court-appointed bankruptcy administrator sued market maker Jane Street, alleging the firm used confidential information and manipulated markets to profit during the Terra ecosystem's collapse. Jane Street denied the allegations, calling the lawsuit an attempt to extract money and maintaining that investor losses resulted from fraud committed by Terraform's own management.

The $3 million award covers only a fraction of the total losses claimed by all 275 original plaintiffs, but the ruling provides a legal pathway for other victims to seek recourse. Any further recoveries for investors are expected to depend largely on distributions from the bankruptcy estate, alongside the outcome of other pending litigation.

The case adds to a series of legal actions examining how crypto projects communicated risks to investors before major failures. The US Securities and Exchange Commission has pursued its own enforcement actions against Terraform Labs, while authorities in South Korea continue to investigate the collapse. The SICC's findings may also encourage more representative actions involving digital asset projects in Singapore, which has positioned itself as a hub for crypto innovation while maintaining regulatory oversight through the Monetary Authority of Singapore.

This article is for informational purposes only and does not constitute investment advice.