Multibillion-Dollar Crypto Fraud Charges Filed by SEC Against Terraform Labs and CEO Do Kwon

Written by Joy Rice

Terraform Labs and its CEO, Do Hyeong Kwon, have been charged with fraud by the U.S. Securities and Exchange Commission (SEC), which accuses them of orchestrating “a multibillion-dollar crypto-asset securities fraud.” The SEC alleges that Kwon raised billions from investors by creating an “interconnected suite of crypto-asset securities,” many of which were involved in unregistered transactions. According to the securities watchdog, the charges stem from Kwon and his company’s manipulation of the crypto market, resulting in a significant loss for investors.

SEC Accuses Terraform Labs and CEO Do Kwon of Massive Crypto Fraud Worth Billions

Following the collapse of the Terra blockchain ecosystem, the U.S. Securities and Exchange Commission (SEC) has pressed charges against Terraform Labs Pte. Ltd., a Singaporean company, and its CEO, Do Kwon, after nine months. The SEC’s allegations suggest that Terraform and Kwon solicited funds from venture capitalists, and developed a range of unregistered securities and mirrored assets that mimicked the value of U.S. stocks. The government complaint also includes references to the now-defunct UST algorithmic stablecoin. The SEC released these details on Thursday.

The SEC emphasized that Terraform’s staff and Do Kwon himself promoted the unregistered securities for personal profit. Kwon purportedly made multiple statements claiming that the tokens would appreciate in value. The regulatory agency also mentioned in its complaint that Kwon provided investors with inaccurate information about the stability of UST, the algorithmic stablecoin. This is not the first time Terraform Labs had a tussle with the U.S. securities regulator, as the SEC filed an action against the company over the Mirror Protocol and its mirrored stock assets in 2021.

In 2022, a New York judge instructed Terraform Labs to adhere to the SEC’s investigative subpoenas. The regulatory agency has since filed charges against the company and Do Kwon for breaching the Securities Act and the Exchange Act’s registration and anti-fraud provisions. The SEC chair, Gary Gensler, stated in a release that “We assert that Terraform and Do Kwon did not meet their obligation to provide complete, equitable, and truthful disclosures to the general public, specifically with regards to numerous crypto-asset securities, including LUNA and Terra USD.”

Gensler further added: We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.

The charges that the U.S. regulatory agency brought against Terraform and Do Kwon comes after the SEC’s enforcement measures against Kraken and its staking offerings. Moreover, the New York Department of Financial Services (NYDFS) informed Paxos that it could no longer produce the BUSD stablecoin while simultaneously releasing a consumer notice about BUSD.

The SEC filed the complaint against Terraform and Kwon with the US District Court for the Southern District of New York. Do Kwon’s most recent Twitter activity dates back to the initial week of February 2023. 

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