Do Hyeong Kwon, the CEO of Terraform Labs, has been charged with fraud by the U.S. Securities and Exchange Commission (SEC), which claims that Kwon and his business were involved in “a multibillion-dollar crypto-asset securities fraud.”
According to the securities watchdog, Kwon gathered billions from investors by developing a “interconnected suite of crypto-asset securities,” many of which were used in unregistered transactions.
SEC Files Investment Fraud Complaints Against Terra’s Do Kwon and Terraform Labs
The U.S. Securities and Exchange Commission (SEC) filed charges against Singaporean company Terraform Labs Pte. Ltd. and the company’s CEO, Do Kwon, nine months after the entire Terra blockchain ecosystem collapsed. The Securities and Exchange Commission (SEC) revealed on Thursday that Terraform and Kwon raised billions from venture capitalists and produced a number of unregistered securities and mirrored assets that mimicked the value of US stocks. The now-defunct UST algorithmic stablecoin is also mentioned in the government’s case.
The regulator emphasised that Kwon “repeatedly asserted that the tokens will increase in value” and that both Terraform’s workers and Kwon promoted these unregistered securities in order to “make a profit.” According to the SEC complaint, Kwon “allegedly misled investors regarding the reliability of UST,” an algorithmic stablecoin. The SEC filed a complaint against Terraform Labs in 2021 over the Mirror Protocol and its mirrored stock assets, so this is not the first time the two parties have sparred.
A New York judge ordered Terraform Labs to abide by the investigative subpoenas issued by the SEC in 2022. The SEC has now accused the firm and Kwon of breaking the Securities Act and Exchange Act’s anti-fraud and registration rules. Gary Gensler, chairman of the SEC, stated in a statement that they allege that Terraform and Do Kwon failed to provide the public with complete, fair, and true disclosure as required for a range of crypto-asset securities, most notably for LUNA and Terra Dollar.
Following the SEC’s enforcement efforts against Kraken and its staking services, the U.S. agency has filed allegations against Terraform and Kwon. Moreover, Paxos was informed by the New York Department of Financial Services (NYDFS) that it could no longer mint the stablecoin BUSD while the NYDFS also published a consumer alert about BUSD. The Southern District of New York US District Court received the SEC complaint brought against Kwon and Terraform.
