The US Securities and Exchange Commission (SEC) has charged Terraform Labs (TFL) and its CEO Do Kwon with orchestrating a multi-billion dollar securities fraud.
Today we 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.
— US Securities and Exchange Commission (@SECGov) February 16, 2023
In particular, the SEC included the algorithmic stablecoin TerraUSD (UST) and the LUNA token. The department added that the Singaporean company, along with its head, misled investors, promising an increase in asset prices and assuring them of their stability.
According to the head of the regulator Gary Gensler, Terraform and Do Kwon did not provide the public with “full, fair and honest disclosure.”
The head of the SEC noted that this case demonstrates “the lengths some crypto firms are willing to go to avoid complying with securities laws.”
According to a press release, the complaint has been filed with the Southern District of New York.
Delphi Digital General Counsel Gabriel Shapiro called the vector chosen by the SEC a “roadmap” for pursuing stablecoins. In his opinion, the work carried out in the case of Kwon and TFL was “more thorough than usual.”
you can expect the argument for UST being a security to be a roadmap for how the SEC goes after other stablecoins they will allege that integration, promotion, marketing, commercial deals etc building the stablecoin ecosystems are “efforts of others” that are “reasonably… https://t.co/2X3SvtWMaU pic.twitter.com/q1odgQcNSA
— _gabrielShapir0 (@lex_node) February 16, 2023
Bankless podcast host Ryan Sean Adams expressed a similar sentiment. He noted that the SEC’s victory in this case “will set a broad precedent for greater control over cryptocurrencies.”
Gensler’s next strategy is to go after Do Kwon and UST because he knows no one will defend them and if he wins he’ll establish broad precedent for more control over crypto.
It’s evil genius. https://t.co/FDLoeVcTLb
— RYAN SΞAN ADAMS – rsa.eth 🏴🦇🔊 (@RyanSAdams) February 16, 2023
Earlier, the situation around the project attracted the attention of South Korean regulators. The Seoul Southern District Prosecutor’s Office also became interested in TFL’s activities, and the court issued an arrest warrant for Do Kwon and five other people.
The head of Terraform Labs said he was not “on the run” and was cooperating with law enforcement. At the end of September 2022, Bloomberg learned about the issuance of a “red notice” by Interpol about his detention.
Source: CryptoNewsHerald.com
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