key takeaways
- The SEC filed a lawsuit against Terraform Labs and Do Kwon.
- It claims that Kwon sold unregistered securities and violated the anti-fraud provisions of the federal securities laws.
- The agency wants civil money penalties, devolution, and a ban on Kwon from buying or selling crypto assets.
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Nine months after Terra’s spectacular collapse, the SEC finally decided to indict Do Kwon.
Banned from Crypto
Do Kwon is back in the headlines.
The Securities and Exchange Commission filed a civil suit against Terraform Labs and its infamous CEO Do Kwon for Terra and its native algorithmic stablecoin, UST. The SEC charged the defendants with offering and selling various unregistered securities to investors and violating the anti-fraud provisions of the federal securities laws.
Among other things, the agency is seeking civil money penalties, repayment with interest, and that Kwon and Terraform Labs be prohibited from buying, selling, or offering “crypto asset securities” ever again.
“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.” fixed SEC Chairman Gary Gensler. “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses to investors.”
Stablecoins are cryptocurrencies designed to keep up with a government-issued currency, such as the US dollar. Terra’s stablecoin was unsecured, meaning it was not backed 1:1 with reserves. Rather, the protocol would burn Terra’s native LUNA token to mint an equivalent amount of UST, or conversely mint LUNA tokens to redeem UST. The steering wheel mechanism eventually sent LUNA and UST into a death spiraldirectly wiping out over $40 billion in value from the crypto market.
Kwon currently wanted in 195 countries, after Interpol issued a red alert for him. South Korean authorities claimed in December that he was hiding in Serbia.
Disclaimer: At the time of writing, the author of this article owned BTC, ETH, and various other crypto assets.
