It’s not too soon, the Securities and Exchange Commission (SEC) has announced that it has filed lawsuits against Terraform Labs and its founder Do Kwon. In question, “the sale of unregistered securities” and misleading communication “having caused devastating losses for investors”.
THE SEC takes on Terra
About a year after the Terra (LUNA) affair and the fall of its stablecoin UST, which caused losses of tens of billions of dollars to investors, the Securities and Exchange Commission (SEC) decided to sue Terraform Labs and its founder Do Kwon. They are accused of willfully orchestrating a cryptocurrency fraud.
The SEC complaint was filed Thursday, February 16, in court for the Southern District of New York. In the official document, we understand that the financial policeman is less interested in the final result of this affair as well as the methods used to achieve it.
Concretely, the SEC accuses Terraform Labs and Do Kwon for having offered unregistered titles to his clients. Obviously, the LUNA token is mentioned but we also talk about “mTokens” issued by the Mirror protocol and which allowed direct exposure to American financial securities.
SEC Chairman Gary Gensler explained that from their perspective, the founders of Terra “committed fraud by repeating false and misleading statements to build trust before causing devastating losses to investors”:
“We allege that Terraform and Do Kwon failed to provide the public with complete, fair and truthful information as required for a host of cryptocurrency securities, most notably LUNA and Terra USD. »
The second count therefore relates to the manipulation of investors. From April 2018 to May 2022, Terraform Labs promoted a token ecosystem supposed to offer stable and secure returns, enabling them to rake in billions of dollars.
Do Kwon still on the run
As a reminder, the Terra ecosystem offered tantalizing returns of 18-20% on the UST stablecoin through the Anchor protocol. The associated token, LUNA, rose in value as investors bought UST.
When he lost his dollar peg, the UST weighed several tens of billions of dollars. Its collapse led to that of LUNA, then ranked 10th among the most capitalized cryptocurrencies. In total, 40 billion dollars have evaporated from customer wallets.
According to the SEC, it is especially Do Kwon who has benefited from it. The Korean owned 92% of Terraform shares and misled investors with false claims about the stability of UST, despite being explicitly aware of the “structural weakness” of the stablecoin.
Moreover, the American financial policeman points the finger at abusive and unregulated communication in the United States, through specialized media, YouTube channel and Twitter accounts. It is not impossible that the entities concerned suffer repercussions.
At the time of writing these lines, Do Kwon is on the run and cannot be found. He is the subject of an Interpol red notice and an arrest warrant issued by the Seoul Southern District Prosecutor’s Office four months after Terra’s implosion.