US SEC continues its crackdown on the crypto industry.
The United States Securities and Exchange Commission (SEC), an independent agency of the US federal government enforcing the law against market manipulation, has filed a lawsuit against the developer of the Terra blockchain network, Terraform Labs, and its co-founder Do Kwon.
According to the press release shared on February 16th, Terraform Labs and Do Kwon are charged with “orchestrating a multi-billion dollar crypto asset securities fraud” and, thus, violating “the registration and anti-fraud provisions of the Securities Act and the Exchange Act.”
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The lawsuit filed in the US District Court for the Southern District of New York alleges that from April 2018 to May 2022, Terraform Labs was selling and offering “an inner-connected suite of crypto asset securities.”
In particular, SEC names Terra’s collapsed algorithmic stablecoin TerraUSD (UST), now known as TerraClassicUSD (USTC), and Terra (LUNA), a cryptocurrency now known as Terra Luna Classic (LUNC).
When talking about the charges, US Securities and Exchange Commission Chair Gary Gensler noted:
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.
However, UST and LUNA are not the only tokens listed in the lawsuit. The US SEC also alleges that Terraform Labs unlawfully offered crypto derivatives mirroring the stock prices of publicly listed US firms, dubbed “mAssets.” On top of that, SEC also listed the crypto asset security token Mirror (MIR).
In a nutshell, in its lawsuit, the US SEC claims that Do Kwon and his firm Terraform Labs lied to investors about the stability of UST and other tokens.
However, the US SEC may have to join forces with South Korean prosecutors to hunt down Terraform Labs Do Kwon. Recently, the news broke that Do Kwon is hiding in Serbia.