Feb 17, 2023
SEC Charges Terraform Labs with $Multi-Billion Crypto Securities Fraud
The U.S. 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 Feb. 16 statement, the SEC said that Kwon and Terraform had sold an “inter-connected suite of crypto asset securities, many of which were unregistered transactions.” The agency pointed to Terraform Labs’ now-defunct algorithmic stablecoin, TerraClassicUSD (USTC), and its linked cryptocurrency, Terra Luna Classic (LUNC).
SEC chair Gary Gensler commented that Kwon and Terraform “failed to provide the public with full, fair, and truthful disclosure”, particularly in regards to USTC and LUNC, which were previously known as Terra (LUNA) and TerraUSD (UST). Gensler added:
“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
The SEC has filed a 55-page complaint in the U.S. District Court for the Southern District of New York, containing charges related to violations of the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
The complaint states that Terraform and Kwon had “touted and marketed” its Anchor Protocol, which had been advertised to pay out 20% interest on USTC deposits. It also alleges that Terraform and Kwon misled investors about the stability of Terra’s stablecoin.
Last May, USTC’s peg to the U.S. dollar was lost, causing its price — and the price of LUNC — to effectively become zero. This caused a wider collapse in the digital asset market, resulting in an estimated loss of $40 billion.
Gensler praised the SEC’s staff for their investigation, saying: “The defendants attempted to prevent us from obtaining important information about their business. This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws.”
Kwon, a South-Korean national, has gone missing and is believed to be in Serbia after leaving his residence in Singapore in September. Interpol has issued a Red Notice for Kwon to law enforcement worldwide. Kwon has denied he is hiding from authorities and Terraform have claimed South Korea’s case against Kwon is “highly politicized.”
Cointelegraph reached out to 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 highlighted the need for transparency in the web3 space. With the rise of NFTs, crypto assets, and digital currencies, there is an increasing need for regulation and oversight. The recent developments have also highlighted the importance of NFT promotion, crypto marketing, and NFT marketing agencies.
NFTs are digital assets that are stored on a blockchain. They are unique, non-fungible, and can be used to represent anything from digital art, collectibles, and even real-world assets. NFTs have been gaining traction in recent months, and many companies are now offering NFT promotion services. This can include Twitter NFT marketing, NFT marketing agencies, and even web3 agencies that specialize in selling NFTs.
The SEC’s lawsuit against Terraform Labs and Do Kwon serves as a warning to companies and individuals in the web3 space. It’s important to ensure that you are compliant with all applicable laws and regulations, and that you are transparent about your operations. Additionally, it’s important to work with reputable NFT promotion and marketing agencies to ensure that your NFTs are marketed effectively. Doing so will help ensure that your NFTs are successful and that investors are protected.
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.
