As trouble continues to loom over Terra, the US Securities and Exchange Commission(SEC) is now investigating if the trading of the TerraUSD stablecoin, before it crashed last month, breached the investor-protection regulations.
As per reports, SEC officials are probing if Terraform Labs, the parent firm of UST, was involved in violating securities and investment rules. As a stablecoin, TerraUSD must be pegged 1-to-1 to the US dollar via an algorithm and trading in Luna, its sister token.
However, the troubles began with the sudden collapse of UST starting on May 7. Citing the crisis, Treasury Secretary Janet Yellen urged US Congress for stablecoin regulation. On the other hand, the Acting US Comptroller of the Currency Michael Hsu called it a “wake-up call.”
The SEC investigation may pressurize Terraform and its Chief Executive Officer Do Kwon even more. It’s important to note that both the firm and its CEO are already facing heat from the regulator for the Mirror Protocol, which allows people to trade digital assets tracking the price of US stocks.
Nevertheless, both Terraform and Kwon haven’t been accused of any malpractice related to UST.
There have been no comments from the SEC as of now. On the contrary, Terraform Labs, said that it wasn’t aware of an SEC investigation into UST.
Meanwhile Kwon stated, “We are not aware of any SEC probes into TerraUSD at this time – we’ve received no such communication from the SEC and are aware of no new investigation outside of that involving Mirror Protocol.”
Adding on to this, he also tweeted that, “There’s a lot of misinformation and falsehood out there, and we promise to do our part in making sure as much of it is correct as possible.”