SEC has Sued Do Kwon and Terraform Labs on Account of Fraud
- The United States Securities and Exchange Commission (SEC) has officially filed a lawsuit against Do Kwon and Terraform Labs.
- The regulator said that Do Kwon and Terraform Labs offered and sold an “inter-connected suite of crypto asset securities, many in unregistered transactions.”
- The SEC stated that the two allegedly orchestrated “a multi-billion dollar crypto asset securities fraud.”
- The agency added that the two also market Anchor Protocol and mislead investors with promises of high returns.
The United States Securities and Exchange Commission (SEC) has officially filed a lawsuit against the well-known creator of the Terra ecosystem, which included the LUNA token and the UST stablecoin, which lost its peg to the US dollar in 2022. The collapse of the Terra ecosystem witnessed around $40 billion getting wiped off the industry’s books.
According to a Feb. 16 statement from the SEC, Do Kwon and Terraform Labs offered and sold an “inter-connected suite of crypto asset securities, many in unregistered transactions.” The securities regulator of the US also believes that the two allegedly orchestrated “a multi-billion dollar crypto asset securities fraud.”
The agency also mentioned in its statement the collapse of Terraform Labs’ now-collapsed algorithmic stablecoin, TerraUSD, now known as TerraClassicUSD (USTC), and its connected cryptocurrency, Terra Luna, now known as Terra Luna Classic (LUNC).
The SEC added that Kwon and his company “raised billions of dollars from investors by offering and selling an interconnected suite of crypto asset securities, many in unregistered transactions.”
“While marketing the LUNA token, Terraform and Kwon repeatedly misled and deceived investors that a popular Korean mobile payment application used the Terra blockchain to settle transactions that would accrue value to LUNA. Meanwhile, Terraform and Kwon also allegedly misled investors about the stability of UST,” stated the SEC.
The regulator’s complaint also states that Terraform and Kwon marketed crypto asset securities to investors “seeking to earn a profit, repeatedly claiming that the tokens would increase in value.”
As recently reported by Bitnation, the location of Do Kwon was finally revealed after authorities in South Korea received a tip regarding the whereabouts of the crypto entrepreneur. An official confirmed that Kwon’s location is in Serbia.
“We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD,” said SEC Chair Gary Gensler. “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
The 55-page complaint added that Do Kwon and Terraform Labs “touted and marketed” Anchor Protocol, a blockchain platform that offered a 20% return on the deposits of the stablecoin. The popularity of the Protocol knew no bounds in 2021 but started to decline once the 2022 bear market strengthened.
On the other hand, Do Kwon and Terraform Labs are also facing another legal threat from a group of about 350 investors in Singapore who lost nearly $57 million in the collapse of the TerraUSD cryptocurrency.