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- 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.
On February 17, the U.S. Securities and Exchange Commission (SEC) charged Terraform Labs PTE Ltd, based in Singapore, and Do Kwon with orchestrating a multi-billion-dollar scam involving its algorithmic stablecoin and other crypto assets.
According to the SEC’s complaint, between April 2018 and May 2022, Terraform Labs netted billions of dollars from investors through unregistered transactions by offering and selling a suite of crypto asset securities, including mAssets and Terra USD (UST), which was marketed as an algorithmic stablecoin pegged to the US dollar.
Gensler added:
We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.
According to the petition, Terraform and Kwon mislead investors by offering them alternatives to getting involved in their cryptocurrency business, like the MIR tokens and LUNA, which they misrepresented in terms of value and used to persuade investors to invest money in the company.
For example, the latter asserted that the UST stablecoin was a “yield-bearing” stablecoin that would pay up to 20% interest through the Anchor Protocol and that the LUNA token was used by a Korean mobile payment app to settle transactions, which would raise the token’s value.
The SEC also claims that Terraform and Kwon’s misrepresentations and lies caused the decoupling of UST and its sibling tokens from the US dollar, causing their prices to nearly reach zero in May 2022.
Today we charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.
— U.S. Securities and Exchange Commission (@SECGov) February 16, 2023
The SEC’s enforcement director, Gurbir S. Grewal, emphasized the need for companies to focus on the economic circumstances of an offering and not the labels put on it, while SEC chairman Gary Gensler accused Terraform and Kwon of using materially false and misleading representations to defraud investors.
After a Seoul court issued an arrest warrant for him, Do Kwon, a South Korean citizen, left his residence in Singapore in September and is believed to be in Serbia.
Related: WHERE IS DO KWON? SOUTH KOREA ASKS INTERPOL TO ISSUE RED NOTICE
In September, Interpol issued a Red Notice for Kwon to law enforcement worldwide. However, Kwon denies that he is evading authorities, and Terraform has alleged that South Korea’s case against him is “highly politicized.”
