SEC Charges Do Kwon, Terraform Labs for $60B Crypto Fraud

• The US SEC has charged Do Kwon and Terraform Labs with securities fraud for the collapse of their algorithmic stablecoin, TerraUSD (UST).
•The SEC alleges that the defendants misled investors about the stability of UST and its relationship to Chai payments.
• The regulatory body is seeking a permanent injunction restraining and enjoining Defendants from again violating the federal securities laws.

SEC Charges Do Kwon and Terraform Labs

The United States Securities and Exchanges Commission (SEC) has filed a securities fraud lawsuit against Terraform Labs and its founder – Do Hyeong Kwon. The lawsuit alleges that from April 2018 through May 2022 („Relevant Period“), Terraform and Kwon offered and sold crypto asset securities in unregistered transactions and perpetrated a fraudulent scheme that led to the loss of at least $40 billion of market value, including devastating losses for U.S. retail and institutional investors.

Promotion of Anchor Protocol

The SEC noted that both LUNA and UST were labeled as securities by them in their filing against Do Kwon & Terraform Labs. They have alleged that both defendants were involved in the promotion of Anchor Protocol, which promised a return of 19-20% interest rate on investments made by investors in this protocol.

False Claims Regarding Chai Payments

In addition, the commission has also accused them of falsely claiming that popular Korean electronic mobile payment application called „Chai“ employed the Terraform blockchain network to process transactions when in reality it was not using this blockchain network for any such purpose. Furthermore, they have been accused of replicating Chai transactions to make it seem like their blockchain was being used for commercial purposes when it was not.

Misleading Investors About UST Stability

The SEC claimed that Do Kwon & Terraform Labs had also misled investors about the stability of UST, which is pegged to LUNA tokens. This resulted in an infamous de-pegging event which wiped off more than $60 billion from the market, causing several U.S retail investors to lose their life savings while institutional investors took huge losses amounting into billions of dollars.

Court’s Final Judgment

The SEC is seeking a final judgment ordering permanent injunctions restraining and enjoining Defendants from again violating the federal securities laws described by them in their lawsuit against Do Kwon & Terraform Labs