The U.S. Securities and Exchange Commission has been busy this week. Its latest action is charging Terraform Labs and CEO Do Kwon with fraud.
On Feb. 16, the SEC charged the Singapore-based firm and Do Hyeong Kwon with “orchestrating a multi-billion dollar crypto asset securities fraud.”
The alleged crypto criminal has reached the equivalent of a “5-star wanted level” in Grand Theft Auto V (GTA) terms.
According to the SEC, Terraform and Kwon “raised billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions.”
The scheme, it alleges, began in April 2018 and collapsed in May 2022.
Do Kwon in The Firing Line
Do Kwon has been on the run since the collapse of Terraform Labs last year, His current whereabouts are unknown, but he was recently believed to be in Serbia, according to South Korean authorities.
The SEC also mentioned mAssets, which are crypto derivatives that mirror the prices of stocks for publicly listed companies. It claims that the company used these as a vehicle to lure investors into the ecosystem.
“The complaint further alleges that Terraform and Kwon offered and sold investors other means to invest in their crypto empire, including the crypto asset security tokens MIR—or “mirror” tokens—and LUNA itself.”
Furthermore, it said that Kwon “marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value.”
They touted UST as a “yield-bearing stablecoin,” with returns of as much as 20%, the SEC alleged. Terraform also purportedly misled investors about the stability of UST. The stablecoin collapsed in May, de-pegging from the dollar and bringing down the entire Terra/Luna ecosystem. Furthermore, it is currently worth $0.028 in its new iteration called TerraClassicUSD (USTC).
Gary Gensler on Crypto Warpath
SEC Chair Gary Gensler said:
“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
He added that the case “demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws.” Gensler and the agency are adamant that crypto assets are securities. However, they have yet to be officially and legally classified as such.
The charges against Kwon and the company were filed in federal court for the Southern District of New York in Manhattan. They include violating the registration and anti-fraud provisions of both the Securities and Exchange Acts.
In January, Albright Capital voluntarily dismissed a class-action lawsuit against Terraform Labs.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.