Terraform Labs and Do Kwon are accused of fraud
Terraform Labs and Do Kwon are accused of fraud by the SEC: Terraform Labs and its chief executive, Do Kwon, face fraud charges filed by the Securities and Exchange Commission (SEC) on Thursday for allegedly selling unregistered securities and misleading investors.
What has happened
The charges stem from the offer and sale of Terraform and Kwon crypto asset securities, including the algorithmic stablecoin Terra USD and the MIR token, as well as security-based swaps designed to reflect the share price of US companies.
The SEC alleges that Terraform and Kwon marketed these crypto asset securities to profit-seeking investors, with claims that they would increase their value.
The company and Kwon advertised UST as a “yield” stablecoin, allegedly offering up to 20% interest via the Anchor Protocol while misrepresenting LUNA’s value and utility to investors.
The SEC’s complaint further alleges that Terraform and Kwon misled investors about the stability of UST, which in May 2022 de-pegged from the US dollar, causing the prices of both UST and its sister tokens to fall.
“We allege that Terraform and Do Kwon failed to provide full, fair, and truthful disclosure to the public as is required for a large number of crypto-asset securities, especially LUNA and Terra USD,” SEC Chairman Gary Gensler stated.
“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses to investors.”
The charges against Terraform and Kwon include violation of the registration and anti-fraud provisions of the Securities Law and the Exchange Law. The complaint was filed in the Bankruptcy Court for the Southern District of New York, USA.
“This case demonstrates the lengths to which some crypto companies will go to avoid complying with securities laws, but it also demonstrates the strength and commitment of the SEC’s dedicated public servants,” Gensler stated.
Kwon’s current whereabouts are unknown, though according to the Seoul southern district attorney’s office, he may be in Serbia.
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Source: benzinga.com
