SEC Files Lawsuit Against Terraform Labs and Founder Do Kwon for Multi-Billion Dollar Crypto Securities Fraud

• SEC filed charges against Singapore-based Terraform Labs and Do Kwon on Feb. 17, accusing them of orchestrating a multi-billion dollar crypto asset securities fraud.
• The SEC said that Terraform and Kwon misled investors about the stability of Terra’s stablecoin.

SEC Charges Terraform Labs and Do Kwon with Orchestrating a Multi-Billion-Dollar Crypto Scam

The U.S. Securities and Exchange Commission (SEC) has charged Terraform Labs PTE Ltd and Do Kwon with orchestrating a multi-billion-dollar scam involving its algorithmic stablecoin and other crypto assets.

The SEC alleges that between April 2018 and May 2022, Terraform Labs raised billions of dollars from investors through unregistered securities offerings. The SEC alleges that Terraform Labs and Kwon misled investors about the nature of their investments and the risks involved.

Specifically, the SEC alleges that Terraform Labs and Kwon:

• Represented that UST was a “stablecoin” that was pegged to the U.S. dollar, when in fact it was not.
• Represented that LUNA was used by a Korean mobile payment app to settle transactions, when in fact it was not.
• Represented that investors could earn high yields on their investments in UST and LUNA, when in fact those yields were unsustainable.

The SEC’s charges allege that Terraform Labs and Kwon’s misrepresentations and omissions caused investors to lose billions of dollars when UST and LUNA collapsed in value in May 2022.

Do Kwon, a South Korean citizen, is currently believed to be in Serbia. The SEC has requested that Interpol issue a Red Notice for Kwon’s arrest.

The SEC’s charges are a significant development in the ongoing investigation into the collapse of TerraUSD and LUNA. The charges send a clear message that the SEC will not hesitate to take action against those who violate the securities laws.

What Does This Mean for Investors?

The SEC’s charges against Terraform Labs and Do Kwon are a reminder that investors should be wary of investments that promise high yields with little or no risk. Investors should carefully review the disclosures made by issuers of securities and should not rely on representations made by the issuer or its promoters.

If you have invested in UST or LUNA, you may be eligible for relief. The SEC has established a website where investors can learn more about their options and file a complaint.

The Future of Crypto Regulation

The SEC’s charges against Terraform Labs and Do Kwon are a sign that the SEC is taking a more aggressive approach to regulating cryptocurrencies. The SEC has made it clear that it will not hesitate to bring enforcement actions against those who violate the securities laws.

The SEC’s charges are also likely to have a chilling effect on the development of new crypto projects. Investors will be more likely to scrutinize the disclosures made by issuers of crypto securities, and issuers will be more likely to take steps to ensure that their disclosures are accurate and complete.

The future of crypto regulation is uncertain, but the SEC’s charges against Terraform Labs and Do Kwon are a sign that the SEC is committed to regulating the crypto market.