The U.S. Securities and Exchange Commission has indicted failed blockchain company and stablecoin operator Terraform Labs and its founder Do Kwon for defrauding U.S. investors who bought digital assets Terra USD and Luna. bottom.
U.S. financial regulators have accused Kwon and Singapore-based companies of offering and selling a series of interconnected cryptocurrency securities in “many unregistered transactions” between April 2018 and May 2022. Blame the crypto companies that put. In federal court, the SEC also misrepresented the stability of Terra USD, a stablecoin developed by the company and its founders Kwon. Terra USD was to maintain his 1:1 peg to the US dollar through sister token Luna.
Kwon and Terraform also misled investors about Korean mobile payment app Chai, claiming that Chai used Terraform to settle transactions, according to files (PDF) filed with the federal court. But in reality, according to the lawsuit, Chai’s payments did not use his Terraform blockchain to process payments.
The collapse of the UST in 2022 wiped out at least $40 billion in market value, setting off a domino effect that led to industry-wide bankruptcies from Three Arrows Capital to FTX. (Three Arrows Capital and FTX had plenty of other hoaxes, though.)
The SEC also said that Terraform’s UST will fall below $1 for the first time in May 2021, and that Kwon and Terraform have partnered with third parties who could have bought vast amounts of UST to restore the $1 peg. He said they had talked in secret. After reviving the peg, Kwon and his company pitched it as “a triumph for decentralization and the ‘automatically self-healing’ UST/Luna algorithm,” calling for third-party intervention to revive the UST price. The agency said it did not disclose.
SEC Chairman Gary Gensler said in a statement, “Defendants attempted to prevent us from obtaining material information about their businesses.
Earlier this month, South Korean prosecutors visited Serbia, which has emerged as a likely location for Kwon to stay. His whereabouts remain unknown after Interpol issued a deficit notice to Kwon in September.
“Today’s lawsuit does more than just hold defendants accountable for their role in the collapse of Terra, which has devastated both retail and institutional investors and shocked the crypto market,” said the SEC’s Enforcement Division. Director Gurbir S. Grewal said. “As our complaint alleges, the Terraform ecosystem was neither decentralized nor financial. was controlled by the defendant rather than ”
