Do Kwon and Terraform Labs Officially Charged by the SEC
The SEC joins the hunt for Do Kwon!
Hey Peeps!
On February 16th, the U.S. Securities and Exchange Commission (SEC) announced, via press release, charges against Terraform Labs and it's co-founder and CEO, Do Kwon, for defrauding investors.
The SEC claims the Terraform and Kwon orchestrated a "multi-billion dollar crypto asset securities fraud" that involved the cryptocurrencies, LUNA and TerraUSD (UST).
The SEC's criminal complaint was filed in the U.S. District Court for the Southern District of New York.
Officially, the SEC has charged the defendants with "violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act".
From April 2018 until the collapse of the scheme in May 2022, raised billions of dollars while intentionally misleading investors about the potential of LUNA and the stability of UST.
Here is the tweet from the SEC announcing the charges:
"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. We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.
I commend the SEC’s hard-working staff who remained vigilant in such an important investigation, even when the defendants attempted to prevent us from obtaining important information about their business. This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws, but it also demonstrates the strength and commitment of the SEC’s dedicated public servants."
- Gary Gensler, Chief of the SEC
The co-founder and CEO of Terraform Labs, Do Kwon, has been on the run since arrest warrants began to be issued for him, starting in September by South Korea and then followed up by Interpol.
On February 7th, Bloomberg published a report stating that South Korean authorities traveled to Serbia in search of the fugitive, Do Kwon.
This follows previous reports by CoinDesk that the fugitive CEO originally left South Korea for Singapore, then Singapore for Dubai, and then most recently left Dubai to hide away in Serbia.
"Today’s action not only holds the defendants accountable for their roles in Terra’s collapse, which devastated both retail and institutional investors and sent shock waves through the crypto markets, but once again highlights that we look to the economic realities of an offering, not the labels put on it. As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance. It was simply a fraud propped up by a so-called algorithmic 'stablecoin' – the price of which was controlled by the defendants, not any code."
- Gurbir Grewal, Director of the SEC’s Division of Enforcement
I think we all remember how the crypto winter of 2022 started, with the UST stablecoin losing it's peg to U.S. dollar and then Do Kwon trying to save it by pumping the market with LUNA, which ultimately led to the collapse of the entire $60 billion Terra ecosystem.
LUNA went from a top 10 cryptocurrency to being worth pennies on the dollar in the span of a few days.
It was truly a surreal spectacle to behold, but it also started the death spiral of 2022, that cratered the prices of crypto across the board and led to a slew of crypto companies collapsing.
This article, by Liam J. Kelly on Decrypt, does an amazingly in-depth job at explaining the Terra ecosystem imploded.
Will the news of these charges finally bring Do Kwon out of hiding?
What do you think will even come of these charges?
Do you think there is a chance affected token holders could see any funds out of this?
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