The U.S. Securities and Exchange Commission (SEC) has charged Terraform Labs and its CEO, Do Hyeong Kwon, with allegedly orchestrating a “multi-billion dollar crypto asset securities fraud” in which Kwon and his company charged with fraud. The securities watchdog alleges that Kwon raised billions of dollars from investors by creating “a series of interconnected crypto asset securities,” many of which involved unregistered transactions.
SEC Charges Terra’s Do Kwon and Terraform Labs with Defrauding Investors
Nine months after the collapse of the entire Terra blockchain ecosystem, the U.S. Securities and Exchange Commission (SEC)has charged Singaporean company Terraform Labs Pte. Ltd. and its CEO,Do Kwon. Mr. Do Kwon. The SEC detailed Thursday that Terraform and Kwon raised billions of dollars from venture capitalists to create a series of unregistered securities and mirror assets that replicated the value of U.S. stocks. The government’s complaint also mentions the now-defunct UST algorithm stablecoin.
The regulators emphasize that both TerraForm employees and Kwon sold these unregistered securities for “profit,” and detail that Kwon “repeatedly claimed that the tokens would increase in value.” Regarding the algorithmic stablecoin UST, Kwon “allegedly misled investors about the stability of the UST,” the SEC complaint states.This is not the first time Terraform Labs has tangled with U.S. securities regulators, as the SEC has announced that in 2021, Mirror Protocol and its mirror stock assets and filed a lawsuit against the company.
In 2022, a New York judge ordered TerraForm Labs to respond to an SEC investigative subpoena, and the SEC is now charging the company and Kwon with violations of the registration and antifraud provisions of the Securities Act and Exchange Act. SEC Chairman Gary Gensler said in a statement, “We allege that TerraForm and Do Kwon failed to provide the public with the full, fair, and truthful disclosure required for many crypto asset securities, most notably for LUNA and Terra USD.”
Gensler added:
and alleges that he committed fraud by repeatedly making false and misleading statements to build trust before inflicting devastating losses on investors.
The U.S. regulatory charges against TerraForm and Kwong follow SEC enforcement actions against Kraken and its staking services. In addition, the New York Department of Financial Services (NYDFS) informed Paxos that it could no longer mint the stablecoin BUSD and simultaneously issued a consumer noticeregarding BUSDThe SEC complaint filed against Kwon and Terraform was Do Kwon was last activeon Twitterduring the first week of February 2023.
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