The US Securities and Exchange Commission (SEC) charged Terraform Labs and its CEO, Do Hyeong Kwon, with fraud, alleging that Kwon and his company orchestrated “a multi-billion dollar crypto asset securities fraud.” “. The securities watchdog insists Kwon raised billions from investors by creating an “interconnected pool of crypto asset securities,” many of whom were involved in off-the-record transactions.
SEC accuses Do Kwon and Terra’s Terraform Labs of defrauding investors
Nine months after the entire Terra blockchain ecosystem collapsed, the US Securities and Exchange Commission (SEC) loaded the Singaporean company Terraform Labs Pte. Ltd. and the CEO of the company, do kwon. The SEC detailed Thursday that Terraform and Kwon raised billions from venture capitalists and created a pool of unregistered securities and mirror assets that replicated the value of US stocks. The government complaint also mentions the now-defunct algorithmic stablecoin UST.
The regulator stressed that both Terraform employees and Kwon traded these unregistered securities to “make a profit” and detailed that Kwon “repeatedly claimed that the tokens would increase in value.” Regarding the UST algorithmic stablecoin, Kwon “allegedly misled investors about the stability of UST,” the SEC complaint notes. This is not the first time that Terraform Labs has had a falling out with the US securities regulator, as the SEC filed an action against the firm over the Mirror Protocol and its mirrored stock assets in 2021.
In 2022, a New York judge ordered Terraform Labs to comply with SEC investigative subpoenas. The SEC now charges 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 full, fair, and truthful disclosure to the public as is required for a large number of crypto-asset securities, especially LUNA and Terra USD,” SEC Chairman Gary Gensler said in a statement. release.
Gensler further added:
We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses to investors.
The US regulator’s charges against Terraform and Kwon follow SEC enforcement actions against Kraken and its staking services. Additionally, the New York Department of Financial Services (NYDFS) told Paxos that it could no longer mint the BUSD stablecoin while also issuing a consumer notice with respect to BUSD. The SEC’s complaint filed against Kwon and Terraform has been filed in the US District Court for the Southern District of New York. Do Kwon was last active on Twitter during the first week of February 2023.
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