The United States Securities and Exchange Commission (SEC) has announced that it has charged Singapore-based Terraform Labs and its founder, Do Kwon, ‘with orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.’
Terraform Labs and Do Kwon Offered and Sold Unregistered Securities
The US SEC explained that from April 2018 to May 2022, when LUNA and UST collapsed, Terraform Labs and Do Kwon raised billions of dollars from investors ‘by offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions.’ This included the algorithmic stablecoin Terra USD (UST), LUNA and ‘mAssets’ that mirrored the price of US stocks.
The SEC added:
The complaint further alleges that Terraform and Kwon offered and sold investors other means to invest in their crypto empire, including the crypto asset security tokens MIR—or “mirror” tokens—and LUNA itself.
The SEC’s complaint alleges that Terraform and Kwon marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value.
Terraform Labs and Do Kwon Failed to Provide the Public with Truthful Information
US SEC Chair Gary Gensler stated that Terraform Labs and Do Kwon failed to provide the public with full and fair information regarding the crypto-asset securities. He said:
We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD.
We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.
Terra and UST Were Simply a Fraud
He added that the SEC’s actions hold Terraform labs and Do Kwon accountable for their roles in the collapse of the Tera ecosystem, which was simply a fraud. He explained:
© Solana Daily Brief, Inc. All Rights Reserved. This article is for informational purposes only. It is not to be used as legal, tax, investment, financial, or other advice.As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance. It was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.