SEC accuses Terraform Labs and founder Do Kwon of defrauding investors • InNewCL
SEC accuses Terraform Labs and founder Do Kwon of defrauding investors • InNewCL
#SEC #accuses #Terraform #Labs #founder #Kwon #defrauding #investors #InNewCL Welcome to InNewCL, here is the new story we have for you today:
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The US Securities and Exchange Commission has accused collapsed blockchain firm and stablecoin operator Terraform Labs and its founder Do Kwon of defrauding US investors who bought digital assets Terra USD and Luna.
The US financial regulator accused Kwon and the Singpoare-based crypto firm of offering and selling an interconnected suite of crypto-asset securities from April 2018 to May 2022, “many in unregistered transactions.” The SEC also alleged in federal court that the firm and its founder misrepresented the stability of Terra USD, a stablecoin developed by Kwon, which maintains its 1-to-1 peg to the US dollar through its sister token Luna should.
Kwon and Terraform also misled investors with false statements about Korean mobile payments app Chai, claiming that Chai used Terraform to process transactions, according to the filing (PDF) in federal court. In fact, however, Chai Payments did not use the Terraform blockchain to process payments, according to the lawsuit.
The collapse of UST in 2022 wiped out at least $40 billion in market value, triggering a domino effect and triggering industry-wide bankruptcies from Three Arrows Capital to FTX. (Though both Three Arrows Capital and FTX have done plenty of other shenanigans.)
The SEC also said that Terraform’s UST fell below $1 for the first time in May 2021, and Kwon and Terraform were confidentially discussing with a third party who could have bought an enormous amount of UST to get the $1 peg back to introduce After the tether was restored, Kwon and his firm marketed it as a “triumph of decentralization and the UST/Luna ‘automatically self-healing’ algorithm,” without disclosing third-party intervention to revive the UST price, the agency said.
“…the defendants attempted to prevent us from obtaining important information about their business,” SEC Chairman Gary Gensler said in a statement.
Earlier this month, prosecutors in South Korea traveled to Serbia, which has emerged as Kwon’s likely whereabouts. His whereabouts are unknown after Interpol issued a red advert for Kwon in September.
“Today’s lawsuit not only blames the defendants for their role in the collapse of Terra, which devastated both retail and institutional investors and sent shockwaves through the crypto markets,” said Gurbir S. Grewal, director of the SEC’s Enforcement Division. “As claimed in our complaint, the terraform ecosystem was neither decentralized nor funded. It was simply a scam powered by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.”
