The US Securities and Exchange Commission (SEC) continues to work hard this week. Today it became known that the regulator presented to the head of Terra Do Kwon and Terraform Labs accusations in organizing a major 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
“We contend that Terraform and Do Kwon have failed to provide the public with full, fair and truthful disclosures as required for a variety of crypto asset securities, most notably LUNA and Terra USD. We also allege that they committed fraud by repeating false and misleading statements to build trust before hurting investors,” explained SEC Chairman Gary Gensler.
In June 2022, the SEC announced the launch of an investigation into the collapse of the Terra project. The regulator was about to check whether the UST stablecoin violated securities laws.
The collapse of Terra
UST and LUNA prices started falling on May 10th. The algorithmic stablecoin UST lost its peg to the dollar and went into free fall. Following, with a slight delay, but also dramatically, the LUNA cryptocurrency collapsed, with the help of which the leaders tried to save the stablecoin.
The results were terrible – UST fell from $0.9 to $0.002. And the LUNA token fell by 99%. Together with them, for the company, bitcoin collapsed, pulling the rest of the cryptocurrency market with it. 200,000 wallets of the Terra ecosystem turned into a pumpkin. In addition, many projects on the Terra blockchain were also destroyed.
Investors lost huge amounts of money and Do Kwon became a household name. They hate him, they laugh at him, they want him to be in the dock as soon as possible. Since the collapse of the ecosystem, Kwon has remained at large and is giving interviews – he admits that he overestimated his project and shared his suspicions – in his opinion, there was an insider in the Terra team who used information about the vulnerability to enrich himself.
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