US SEC Slaps Lawsuit On Terra LUNA Creator Do Kwon
The U.S. Securities and Exchange Commission continues to tighten its control over the crypto space. Do Kwon, Terra LUNA creator, is the latest lure for the securities regulator. The Terra ecosystem suffered a major crash in May 2022 that saw investors lose more than $40 billion.
The SEC filed a complaint with a U.S. Federal Court in Manhattan accusing Do Kwon, alleging that he orchestrated a $40 billion securities fraud involving LUNA (UST) and Terra’s algorithmic stablecoin TerraUSD.
Do Kwon is on the wanted list for global regulators! South Korean regulators have been searching for his location over the past few months and have also issued an Interpol Notice. According to reports, Terra founder Terra disappeared in Serbia.
Do Kwon is being investigated by the US SEC for the first time. SEC’s complaint states that Terraform Labs sold securities under the guise of “unregistered transactions”, billed as “profit-seeking investment” and promising up to 20% interest. Gary Gensler, Chair of the SEC, spoke out about the development.
“We allege Terraform and Do Kwon failed provide the public with full disclosure, fair and truthful information as required for a number of crypto asset securities, including Terra USD and LUNA. We also allege they committed fraud by making false and misleading statements in order to build trust and prevent investors from suffering devastating losses.
Terra Stablecoin: Are Kwon’s Investors Misled by Kwon
SEC observed that Terraform Labs promoted the TerraUSD (UST), stablecoin as a “yield bearing” stablecoin. Securities regulators also claimed that Terraform Labs founder Do Kwon misled investors while marketing the LUNA token. Kwon also misled investors about the stability of TerraUSD (aka UST).
Last May 22, UST began de-pegging from U.S. Dollars and the price for its sister token fell to almost zero. Kwon was also accused by the SEC of misleading customers. It claimed that Chai, a South Korean mobile application, processed transactions between merchants as well as consumers. It noted:
“Chai payments didn’t use the blockchain to settle and process payments. To make it appear that Chai payments were happening on Terraform blockchain, defendants deceptively replicated them onto Terraform blockchain. In reality, Chai payments were made using traditional means.
The SEC pointed out that Terraform was neither decentralized nor funded in the lawsuit. It stated that the Terraform ecosystem was a fraud supported by a so-called “algorithmic stablecoin”.
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