Feb 18, 2023

SEC Charges Terraform Labs Founder with $Multi-Billion Crypto Fraud

The US Securities and Exchange Commission (SEC) has filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly participating in a multi-billion dollar crypto asset securities fraud.

In a statement released on February 16, the SEC said that Terraform and Kwon had illegally offered and sold a “suite of interconnected crypto asset securities” which included TerraClassicUSD (USTC) and Terra Luna Classic (LUNC).

The SEC also took issue with mAssets, crypto derivatives that track the stock price of publicly listed companies, as well as the issuance of the Mirror (MIR) governance token for the Mirror protocol which lists mAssets.

SEC chair Gary Gensler commented on the case, saying that Terraform and Kwon “failed to provide the public with full, fair, and truthful disclosure” and “committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”

The SEC filed a 55-page complaint in the US District Court for the Southern District of New York with charges relating to violations of the registration and anti-fraud provisions of the Securities Act and the Exchange Act.

The complaint stated that Terraform and Kwon had “touted and marketed” the Anchor Protocol, which at one point was advertised to pay out 20% interest on USTC deposits. It also alleged that Terraform and Kwon misled investors about the stability of Terra’s stablecoin.

The depeg event of USTC from the US dollar in May caused its price, as well as the price of LUNC, to collapse to zero and resulted in a wider collapse of the digital asset market that wiped out an estimated value of $40 billion.

Gensler praised the SEC’s staff for their investigation, saying that the defendants had “attempted to prevent us from obtaining important information about their business.”

Kwon, a South-Korean national, is currently at large and believed to be in Serbia after leaving his residence in Singapore in September, following a Seoul court issuing an arrest warrant for him. Interpol reportedly issued a Red Notice for Kwon to law enforcement worldwide in September.

Kwon has denied he’s hiding from authorities and Terraform have claimed South Korea’s case against Kwon is “highly politicized.”

Cointelegraph contacted Terraform Labs for comment but did not receive an immediate response. Do Kwon could not be reached for comment.

The SEC’s lawsuit against Terraform Labs and Do Kwon has the potential to have far-reaching implications for the crypto and web3 space. The case is a reminder of the importance of compliance when it comes to selling NFTs and other crypto assets.

For those looking to get into the NFT space, it’s important to understand the legal requirements for selling NFTs. This means researching the applicable laws and regulations and consulting with an experienced NFT lawyer or NFT marketing agency.

Additionally, it’s important to understand the different marketing strategies for selling NFTs. This includes utilizing social media platforms such as Twitter and Instagram for NFT promotion, as well as leveraging the services of a web3 agency to ensure that your NFT marketing efforts are effective and compliant.

The SEC’s lawsuit also serves as a warning to those looking to invest in crypto assets. Investing in crypto assets can be a risky endeavor, and it’s important to do your research and understand the risks before investing. Additionally, it’s important to be aware of any potential red flags, such as overly optimistic claims or promises of high returns.

The SEC’s lawsuit against Terraform Labs and Do Kwon is a reminder of the importance of compliance and due diligence when it comes to investing in crypto assets. By understanding the applicable laws and regulations, as well as researching the asset before investing, investors can protect themselves from becoming victims of crypto fraud.

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.