SEC Charges Terraform Labs CEO Do Kwon With Multibillion Dollar Crypto Fraud
The U.S. Securities and Exchange Commission has charged Terraform Labs and Do Hyeong Kwon with fraud. The Securities watchdog claims that Kwon and his company created a “interconnected suite” of crypto-asset security that helped investors raise billions. Many of these securities were involved in unregistered transactions.
SEC Charges Terra’s Do Kwon & Terraform Labs with Defrauding Investors
Nine months after the collapse of the entire Terra blockchain ecosystem, the U.S. Securities and Exchange Commission charged Terraform Labs Pte. Do Kwon, the CEO of the firm, was also charged. On Thursday, the SEC revealed that Terraform and Kwon had raised billions of dollars from venture capitalists. They also created a series of unregistered securities as well as mirrored assets that mirrored the value of U.S. stocks. The government also mentioned the now-defunct UST algorithmic stabilitycoin in its complaint.
Kwon and Terraform employees marketed unregistered securities to “earn a profits,” and Kwon repeatedly claimed that tokens would increase value. The SEC complaint also notes that Kwon “allegedly misled investors regarding the stability of UST.” Terraform Labs has been in a dispute with the U.S. securities regulator before. In 2021, the SEC filed an enforcement action against the company for its Mirror Protocol and mirrored stock assets.
Terraform Labs was ordered by a New York judge to comply with the SEC’s investigative subpoenas in 2022. The SEC has now charged Kwon and Terraform Labs with violating the Securities Act’s registration and anti-fraud provisions. “We allege Terraform and Do Kwon failed provide the public with full disclosure, fair and truthful disclosure as required to a host crypto-asset securities most notably for LUNA or Terra USD,” Gary Gensler, SEC chair, stated in a statement.
We also allege they committed fraud by making false and misleading statements in order to build trust and cause devastating losses for investors.
The U.S. regulator’s accusations against Terraform, Kwon and others follow the SEC’s enforcement actions against Kraken. Paxos was also informed by the New York Department of Financial Services that it could not mint stablecoin BUSD and issued a consumer notice about BUSD. The US District Court for Southern District of New York received the SEC complaint against Kwon, Terraform and Terraform. Do Kwon was last active via Twitter in the first week of February 2023.
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