SEC just filed a lawsuit against Terraform Labs and its founder, Do Kwon, for “orchestrating a multi-billion dollar crypto asset securities fraud.”
In the 16 Feb. press release, SEC Chair Gary Gensler said:
We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD. We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.
According to the lawsuit:
Terraform and Kwon also misled investors about one of the most important aspects of Terraform’s offering – the stability of UST, the algorithmic ‘stablecoin’ purportedly pegged to the U.S. dollar. UST’s price falling below its $1.00 ‘peg’ and not quickly being restored by the algorithm would spell doom for the entire Terraform ecosystem, given that UST and LUNA had no reserve of assets or any other backing.
Gensler commended the SEC’s staff on their investigation, adding: “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.
Related: Has anyone seen Do Kwon?
As for Do Kwon, his current location is unknown. As we reported last week, South Korean officials went to Serbia to find him. All because he was spotted there two months ago. Until now, Do Kwon has not admitted his guilt and is hiding from international authorities.
Related: South Korean officials travel to find Do Kwon
According to an article on Cointelegraph, Gabriel Shapiro, who is the general counsel at the Delphi Labs investment firm, recently took to Twitter to share his thoughts on the SEC’s case against Kwon and Terraform. He noted that the SEC’s arguments in the complaint were unusually detailed and thorough:
Do you think this case could be used as a “roadmap” for the regulator to sue other stablecoin issuers in the future?
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