The Security and Exchange Commission sued bankrupt Terraform Labs and its co-founder, Do Kwon in a multi-billion dollar scam through crypto asset securities and stablecoin, Terra USD (UST).
The firm collapsed last year after the de-pegging issue generated in UST, which sparked turmoil in the crypto space and affected numerous lending platforms and exchanges. It devastated both retail and institutional investors.
According to the complaint filed by SEC, Terraform and Kwon had raised billions of dollars from investors between April 2018 and May 2022 by selling ‘an inter-connected suite of crypto asset securities’. Out of this, so many were proceed through unregistered transactions, including mAssets and TerraUSD (UST).
Terraform and Kwon also allegedly misled investors about the stability of UST. In May 2022, the depeg issue was generated in UST, which also influenced LUNA’s market value negatively and plunged it close to zero.
Also Read: SEC sues Paxos over Binance USD Token
“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.”
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement declined the claim that Terraform ecosystem was neither decentralized, nor finance. Instead, it was fraud executed through “algorithmic ‘stablecoin’, the price of which was controlled by the defendants, not any code,” he says.
