The United States Securities and Exchange Commission (SEC) has charged Terraform Labs and fugitive founder Do Kwon with two federal securities counts for orchestrating a multi-billion dollar crypto securities fraud.

Terraform, Do Kwon Offered Unregistered Securities

A complaint filed on Thursday by the SEC accused Terraform and Kwon of raising billions of dollars from investors through sales of an “inter-connected suite of crypto asset securities” between April 2018 and May 2022. According to SEC, the assets included the algorithmic stablecoin Terra USD and LUNA, which were unregistered. "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," said SEC Chair Gary Gensler. "We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors."

Kwon Deceived Investors

SEC’s complaint alleged that Terraform and Kwon promoted the tokens with repeated claims that they would increase in value. It also gave an instance where UST was marketed as a “yield-bearing” stablecoin that pays 20% interest through Terraform’s native protocol Anchor. The agency also faults Kwon for misleading investors into believing that the Terra blockchain was being used by a popular Korean mobile payment application to process transactions, which would boost LUNA’s value. In all, the SEC charged Kwon and Terraform Labs with violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act.

S. Korean is Hunting for Do Kwon

The agency’s action comes almost a year after the Terra ecosystem imploded, wiping out over $40 billion in the cryptocurrency market. Several notices, including arrest warrants, have been issued on Kwon following the collapse of Terra. However, Kwon has since been hiding from prosecution, although he has repeatedly claimed otherwise. Earlier this month, South Korean officials flew to Serbia in search of Kwon, following new leads that the Terra founder has been hiding in the country.