In May last year, the Terra ecosystem suffered huge losses due to the death spiral of UST and LUNA. Now, nearly 10 months later, the SEC has officially filed a lawsuit against Terraform Labs and Do Kwon, claiming they were involved in unregistered securities and crypto-asset fraud.
(Extended reading: 84 million US dollars leveraged a 40 billion financial empire, the whole story of the collapse of UST)
SEC launches lawsuit over Terra empire collapse
According to a press release from the SEC, it announced charges against Singapore-based Terraform Labs and its founder Do Kwon (hereinafter referred to as the defendants) for orchestrating crypto-asset securities fraud involving algorithmic stablecoins and other crypto-asset securities.
The document states that from April 2018 to the collapse of the Terra ecosystem in May 2022, the defendants raised billions of dollars from investors by selling a series of related crypto-asset securities, many of which were unregistered. Transactions are conducted and these cryptoasset securities include the following:
mAssets: A security-based swap transaction (Swap) designed to pay returns by tracking the price of U.S. company stocks, from the Mirror protocol.
MIR: The governance token of the Mirror protocol.
Terra USD (UST): A crypto-asset security known as an "algorithmic stablecoin" that is algorithmically exchangeable for LUNA and pegged to the U.S. dollar.
LUNA: The reserve and governance token of the Terra ecosystem, used to maintain a link with UST and pay for on-chain transaction gas fees.
The SEC said the defendants marketed crypto-asset securities to investors seeking profits and repeatedly claimed that the tokens would increase in value. For example, describing UST as a stable currency with income, which can earn 20% interest through the Anchor protocol; or misleading investors to believe that a mobile payment app in South Korea will use the Terra blockchain to settle transactions, thereby increasing the LUNA price.
Regarding the above incident, SEC Chairman Gary Gensler said:
“We allege that Terraform and Do Kwon failed to provide the public with full, fair and honest disclosures required of crypto-asset securities, in particular LUNA and Terra USD. We also allege that they continued to disclose information before causing catastrophic harm to investors. Use false and misleading statements to build investor confidence in order to commit fraud.”
Accordingly, the SEC filed a complaint against the defendants in the District Court for the Southern District of New York, alleging violations of the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
This article took 10 months! SEC files lawsuit against Do Kwon involving crypto-asset securities fraud first appeared on Chain News ABMedia.
