Feb 17, 2023
SEC Charges Terraform Labs and Founder with $Multi-Billion Crypto Fraud
The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Do Kwon, founder of Terraform Labs, and his company for allegedly engaging in a multi-billion dollar crypto asset securities fraud. The SEC alleged that Terraform and Kwon offered and sold a suite of crypto asset securities, many in unregistered transactions, with the intention of deceiving investors.
The SEC’s 55-page complaint, filed in the U.S. District Court for the Southern District of New York, accused Terraform and Kwon of violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act. It also alleged that the company and its founder had failed to provide full, fair, and truthful disclosure to the public.
The SEC’s investigation focused on Terraform’s algorithmic stablecoin, TerraClassicUSD (USTC), and its connected cryptocurrency, Terra Luna Classic (LUNC). It also took issue with mAssets, crypto derivatives that mirror the stock price of publicly listed companies, and Terraform’s issuance of Mirror (MIR), a governance token for the Mirror protocol that lists mAssets.
The SEC alleged that Terraform and Kwon touted and marketed their Anchor Protocol, which at one point was advertised to pay out 20% interest on USTC deposits. It also said the company and its founder misled investors about the stability of Terra’s stablecoin.
The SEC’s chairman, Gary Gensler, commented on the case, saying: “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
The SEC’s allegations were proven to be true when USTC lost its peg to the U.S. dollar in May, causing its price and the price of LUNC to collapse to zero. This resulted in a wider collapse in the digital asset market that wiped out an estimated value of $40 billion.
Kwon, a South-Korean national, is currently at large and believed to be in Serbia after leaving his residence in Singapore sometime in September following a Seoul court issuing an arrest warrant for him. Interpol reportedly issued a Red Notice for Kwon to law enforcement worldwide later in September.
Kwon has denied he is hiding from authorities and Terraform have claimed South Korea’s case against him is “highly politicized.”
The SEC’s case against Kwon and Terraform Labs highlights the importance of NFT marketing and promotion, as well as the need for a web3 agency to help companies in the space adhere to the law. It also serves as a reminder to investors of the importance of doing due diligence before investing in crypto assets.
For those looking to sell NFTs, it’s vital to have an NFT marketing agency to help you promote your NFTs on social media, such as Twitter, and ensure you’re compliant with all legal regulations. A web3 agency can also help you stay on top of the latest trends in the crypto space, as well as advise you on the best ways to go about selling NFTs.
Disclaimer: All investment or financial opinions expressed by MoonLanding Media are not recommendations and are intended for entertainment purposes only. Do your own research prior to making any kind of investment. This article has been generated based on trending topics, has not been fact checked and may contain incorrect information. Please verify all information before relying on it.
