_The US Securities and Exchange Commission has charged the collapsed blockchain firm and stablecoin operator Terraform Labs and its founder Do Kwon with defrauding U.S. investors who purchased the digital assets Terra USD and Luna._
Terraform Labs, a blockchain company that operated a stablecoin called Terra USD, is being charged by the SEC with fraudulently selling investments in these assets to unsuspecting investors. According to the SEC’s charges, Do Kwon posed as a reliable businessman when he lied about his experience founding and running Terraform Labs, whereas in reality he had no prior experience in this field. As a result of these fraudulent activities, many US investors lost their money due to poor investment decisions.
The stablecoin Terra USD, which was developed by Kwon, was found to be unstable and unable to maintain its pegging to the U.S. dollar, which led to the company and its founder misrepresenting its stability. However, this is just one of many cases where crypto firms have been accused of offering and selling unstable products or tokens with false promises. As these products continue to stack up regulatory pressure on the industry, it remains to be seen how long these scams will continue unchecked.
The lawsuit alleges that Kwon and Terraform misled investors by claiming that Chai used the Terraform blockchain to process payments. But in fact, Chai payments did not use the Terraform blockchain to process payments, according to the lawsuit.
The collapse of UST in 2022 led to the wiping out of at least $40 billion in market value, which set off a domino effect, triggering industry-wide bankruptcies from Three Arrows Capital to FTX. The high number of bankruptcies was likely exacerbated by the fact that many companies – including UST – were highly leveraged and risky, meaning that even small declines in stock prices could lead to large losses for investors. Combined with the broader economic slowdown following the financial crisis, this pushed many companies into bankruptcy or distress mode.
The SEC charged Kwon, Terraform, and a third party with manipulating the price of Terraform’s UST token in an attempt to make more money. This manipulation allegedly involved restoring the $1 peg and then marketing it as a “triumph of decentralization” without disclosing the involvement of a third party.
The SEC has filed civil charges against two hedge funds, alleging that they attempted to prevent the agency from obtaining critical information about their operations. The action comes as the SEC continues to crack down on firms thattry to keep them from investigating potential securities violations.
The South Korean prosecutors’ search for Kwon nears its end, but the mystery of his whereabouts remains unsolved. Officials in Serbia are now confident that he is living there, and they are working with Interpol to get him extradited back to South Korea. Despite the efforts of officials on both sides of the ocean, Kwon still remains a fugitive
The SEC announced today that it has filed charges against three individuals and a company for their role in the collapse of TerraForm, a fraudulent cryptocurrency company. The defendants were charged with running a Ponzi scheme, fraud, and failing to register as securities dealers. The ICO for TerraForm was supposed to raise millions of dollars from retail and institutional investors but soon collapsed due to frauds perpetrated by the defendants. The collapse sent shockwaves through the crypto communities, demonstrating just how risky it can be to invest in cryptocurrencies without proper verification
