The US Securities and Exchange Commission charged Terraform Labs, a Singapore-based crypto company, and its CEO Do Kwon with multibillion-dollar securities fraud on Thursday.
In a complaint filed in the US District Court for the Southern District of New York, the SEC accuses the defendants of violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
Kwon…
The US Securities and Exchange Commission charged Terraform Labs, a Singapore-based crypto company, and its CEO Do Kwon with multibillion-dollar securities fraud on Thursday.
In a complaint filed in the US District Court for the Southern District of New York, the SEC accuses the defendants of violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
Kwon could not be reached for comment.
The SEC alleges that Terraform and Kwon marketed crypto-asset securities to investors with repeated claims that the tokens would rise in value. The SEC statement also alleges that Terraform and Kwon misled and deceived investors while marketing the LUNA token, a cryptocurrency that crashed in May 2022. Terraform and Kwon also allegedly misled investors about the stability of TerraLUNA, an algorithmic stablecoin decoupled from the US dollar caused the price to plummet to zero in May.
“We allege that Terraform and Do Kwon failed to provide the public with the full, fair and truthful disclosure required for a number of crypto-asset securities, particularly for LUNA and Terra USD,” SEC Chairman Gary Gensler said in a statement. “We also allege that they committed fraud by repeating false and misleading statements to build confidence before causing devastating losses to investors.”
Gensler also stated that this case shows how far “crypto firms will go to avoid complying with securities laws.”
In recent months, the SEC has cracked down on crypto companies, including Kraken, a popular crypto exchange, which was hit with a $30 million fine for failing to register its crypto betting program. The SEC also hit two crypto exchanges known for trading Bitcoin
BTCUSD
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Gemini and Genesis, in January, with charges related to unregistered securities.
Founded in 2018 by Do Kwon and Daniel Shin, Terraform Labs is known for its Terra stablecoin and associated Luna cryptocurrency. In May 2022, stablecoins TerraUSD and Luna collapsed, causing an event that wiped out nearly $45 billion in market capitalization in a week.
After the collapse of stablecoin Terra, South Korean law enforcement had issued a notice to locate and arrest Kwon, who in September claimed to only share his location with friends he plans to meet and with people playing Web3 games.
