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The US Securities and Exchange Commission (SEC) has charged Terraform Labs and its CEO, Do Hyeong Kwon, with fraud, alleging that Kwon and his company orchestrated “a multibillion-dollar crypto-asset securities fraud.” The securities watchdog insists that Kwon raised billions from investors by creating an “interconnected bundle of crypto-asset securities”, many of which were involved in unregistered transactions.
Nine months after the entire Terra blockchain ecosystem collapsed, the US Securities and Exchange Commission (SEC) charged Singaporean company Terraform Labs Pte. Ltd. and the company’s CEO, Do Kwon. The SEC said Thursday that Terraform and Kwon raised billions from venture capitalists and created a series of unregistered securities and mirror assets that replicated the value of U.S. stocks. The government’s complaint also mentions the now defunct UST algorithmic stablecoin.
The regulator emphasized that both Terraform’s employees and Kwon marketed these unregistered securities to “make a profit,” detailing that Kwon “repeatedly claimed that the tokens would increase in value.” As for the algorithmic stablecoin UST, Kwon “allegedly misled investors about the stability of UST,” the SEC complaint notes. This is not the first time Terraform Labs has had a battle with the US securities regulator, as the SEC filed a lawsuit against the company over the Mirror Protocol and its mirrored stock holdings in 2021.
In 2022, a New York judge ordered Terraform Labs to comply with the SEC’s investigative subpoena. The SEC is now charging the company and Kwon with violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act. “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.
Gensler further added:
We also allege that they committed fraud by repeating false and misleading statements to build confidence before causing devastating losses to investors.
The US regulator’s charges against Terraform and Kwon follow the SEC’s enforcement actions against Kraken and its betting services. In addition, the New York Department of Financial Services (NYDFS) told Paxos that it could no longer mint the stablecoin BUSD while also issuing a consumer notice regarding BUSD. The SEC complaint against Kwon and Terraform was filed in the US District Court for the Southern District of New York. Do Kwon was last active on Twitter in the first week of February 2023.
What do you think of the SEC’s charges against Do Kwon and Terraform Labs? Share your thoughts on this topic in the comments section below.
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