SEC complaint says Kwon transferred 10,000 Bitcoin from Terra to a Swiss bank

Do Kwon, the former CEO of Terraform Labs and its infamhighly unstable stablecoin Terra, now has another reason to remain on the lam. The US Securities and Exchange Commission alleged that he and his company transferred 10,000 bitcoin worth hundreds of millions of dollars out of the Terra/Luna project before it inevitably went bust last May.

The collapse of the Terra/Luna stablecoin ecosystem led to a loss of roughly $40 billion for investors and led to a massive market downturn for the entire crypto industry that is still ongoing. This was due to the Terra stablecoin, which was supposed to remain algorithmically “pegged” to the price of the US dollar, being “de-pegged”, leading to a death spiral for both the Terra and Luna cryptocurrencies.

according to complainthe now 31-year-old Kwon had transferred “over 10,000 bitcoins from Terraform onend Luna Foundation Guard crypto-asset platform accounts to a non-hosted wallet” meaning a so-called “cold wallet” unrelated to any crypto exchange that can be connected to the Internet. The SEC then alleges that Kwon transferred bitcoin from this wallet to a bank in Switzerland, and converted it all into cash.

Although the complaint did not mention which bank the Terraform Labs founder used, Kwon has withdrawn more than $100 million in fiat currency from last June to now, according to the SEC’s complaint.

At the time just before the crypto collapse last May, the price of bitcoin was hovering around $30,000, meaning that 10,000 bitcoins could be worth $300 million if Kwon tried to immediately convert it to fiat currency.

The SEC wants Kwon and Terraform Labs to be banned from trading in crypto and to pay penalties for illegal securities trading. SEC Chairman Gary Gensler said in a press release “This case demonstrates the lengths to which some crypto firms will go to avoid compliance with securities laws, but it also demonstrates the strength and commitment of the SEC’s dedicated public servants.”

The SEC also alleged that Kwon misled investors about the stability of his UST stablecoin. According to the complaint, the company also lied to investors that the Terraform blockchain was used by a popular Korean mobile payment app called “Chai.” Instead, the SEC said that Terraform Labs “replicated Chai payments on the Terraform blockchain” to make it seem like there was far more adoption for the technology than there really was.

The complaint refers to a presentation aired on CNBC Africa that the company posted on YouTube back in 2019, in which Kwon said “we’ve had 430,000 customers over the Chai port, and most of them are coming in the last month. And we have treated almost 2 [million] transactions updated.”

Do Kwon has eluded international law enforcement for months now after South Korean prosecutors issued an arrest warrant. He was last traced to Dubai and then Serbiabut the failed crypto entrepreneur has repeatedly claimed that he is not on the runand has further called the charges against him “politically motivated.” Yet the man who is definitely not running away from prosecutors has remained uncharacteristically quiet once prolific Twitter account since the start of 2023.

Throughout the SEC’s complaint, it routinely argues that Terraform Lab’s promotion and transactions of Terra, Luna, and wrapped Luna tokens all count as securities in some way, shape, or form, meaning that the majority of buying and selling crypto using unregistered assets. The SEC has reportedly stepped up its efforts to control crypto markets taking on other stablecoins as the BUSD token issued by Paxos.