Terraform Labs Accused of Fraud by SEC
Crypto entrepreneur Do Kwon and the company he co-founded, Terraform Labs, have been accused of fraudulent activities by the US Securities and Exchange Commission (SEC).
According to the SEC, Kwon and Terraform Labs offered and sold unregistered securities, including the TerraUSD stablecoin, and conducted a scheme that resulted in the loss of at least $40 billion worth of market value. The case is a significant step in the SEC's ongoing efforts to regulate the crypto industry.
The SEC's allegations include the assertion that Kwon and Terraform Labs misled investors by making false statements about their relationship with the South Korean mobile payment app "Chai" and the stability of the stablecoin TerraUSD, which was marketed as maintaining a 1-to-1 peg to the US dollar. The agency has also accused the company and Kwon of offering misleading investment opportunities to investors.
SEC files complaint against Terraform for securities violations
The SEC has filed a complaint in the US District Court for New York's Southern District against Terraform and its founder, Do Kwon, for alleged violations of the Securities Act and the Exchange Act.
The complaint, which spans 55 pages, claims that Terraform and Kwon were engaged in deceptive marketing practices concerning its Anchor Protocol, which advertised a 20% interest rate on deposits of USTC.
The SEC also alleges that the defendants misled investors about the stability of Terra's stablecoin, which lost its US dollar peg in May 2021, resulting in a collapse of the digital asset market that wiped out an estimated $40 billion in value.
South Korean authorities are searching for Kwon, whose current location remains unknown. He is suspected to be in Serbia after departing from his residence in Singapore in September. This search is in relation to an arrest warrant issued in September on allegations including breaches of capital-markets law. Noticing the hide-and-run game, Interpol issued a red notice against him to locate his whereabouts.
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