TerraUSD Stablecoin Scandal: SEC Sues Terraform Labs and Do Kwon for Deceiving Investors – Here's What Happened
The US Securities and Exchange Commission (SEC) has sued Terra founder Do Kwon and his organization Terraform Labs for securities fraud.
“[The SEC] today charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities,” the SEC wrote in a press release published on Thursday.
The statement from the regulator noted that Do Kwon’s “scheme” between April of 2018 and May of 2022 “raised billions of dollars” by selling cryptoassets to investors, often involving “unregistered transactions.”
The SEC also alleged that Kwon and Terraform Labs had promoted their cryptoassets by repeatedly claiming that the tokens would increase in value. It added that investors were “misled and deceived” on at least one matter involving a Korean mobile payment that was said to be using the Terra blockchain.
Lastly, the SEC said Kwon and Terraform Labs misled investors about the stability of the infamous algorithmic stablecoin TerraUSD (UST).
Terraform Labs is the parent company of the failed stablecoin UST and cryptocurrency Luna. The UST stablecoin was meant to have a constant $1 value via a mix of algorithms and trader incentives involving a sister token, Luna.
UST lost its US dollar peg in May of last year, and never recovered despite several rescue attempts from Do Kwon.
The news of the lawsuit also reached the crypto community on Twitter, where several community members questioned the SEC’s actions.
Among those who commented was the popular crypto trader and economist Alex Krüger, who wondered why the SEC didn’t act sooner:
Others also offered their takes, with some users asking how the SEC expects enforcement
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