Terraform Labs and CEO Do Kwon Facing SEC Charged Over Alleged Multibillion-Dollar Crypto Scam
The United States Securities and Exchange Commission (SEC) has charged Terraform labs and its CEO Do Hyeong Kwon with fraud alleging that Kwon and his company orchestrated a multibillion-dollar crypto asset securities fraud.
The securities watchdog insists that kwon raised billions from investors by creating an interconnected suite of crypto asset securities many of which were involved in unregistered transactions.
After nine months Terra blockchain ecosystem collapsed the U.S SEC charged the Singaporean company TerraForm Labs and the firm CEO Do Kwon the SEC detailed on Thursday that Terraform and Kwon raised billions from venture capitalists and created a source of unregistered securities and mirrored assets that replicated the value of U.S stocks. the government complaint also mentions the now-defunct UST algorithmic stablecoin.
The regulator express that both Terraform's employees and Kwon marketed these unregistered securities to earn a profit and detailed that Kwon claimed that the token would increase in value to the algorithmic stablecoin UST Kwon allegedly misled investors about the stability of UST.
The SEC complained this is not the first time Terraform labs had a tussle with the U.S. securities regulator as the SEC filed an action against the company over the Mirror Protocol and its mirrored stock assets in 2021.
According to SEC chair, Gary Gensler said Terraform labs to comply with the SEC's 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 the public with full, fair and truthful disclosure as requried for a host crypto asset securiteis most notably for LUNA and Terra USD."
He added, "we also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors."
The U.S regulator's charges against Terraform and Kwon follow the SEC enforcement action against Kraken and its staking also the New York Department of Financial Service (NYDFS) said Paxos could no longer mint the stablecoin BUSD while also issuing a consumer notice regarding BUSD the sec compliant filed against Kwon and Terraform was submitted to the US District Court for the Southern District of New York.
Related: South Korean authorities seized $104M from Terra co-founder suspecting unfair profits