Do Kwon And TFL Appear In Latest SEC Case For Fraud And Selling Unregistered Securities
- In the wake of the crypto market review, the SEC’s latest action is to sue Do Kwon and Terraform Labs (TFL).
- The SEC has filed charges of defrauding investors and selling unregistered securities.
- The regulator thinks this is just a scam backed by so-called algorithmic stablecoins.
In its latest enforcement action, the U.S. Securities and Exchange Commission (SEC) sued Terraform Labs, the company behind the failed TerraUSD stablecoin, and co-founder Do Kwon on Thursday.
The SEC brought charges to accuse Terraform and Do Kwon of defrauding investors and selling unregistered securities and stock swaps.
The SEC says Terraform and Do Kwon have repeatedly deceived and deceived investors by claiming that a popular Korean mobile payment app used the Terra blockchain to settle transactions, making transactions increase the value of LUNA.
The allegation includes who is using TerraUSD for payments and calls both the profitable Anchor Protocol and the LUNA token a “crypto asset security,” according to the complaint.
“Terraform and Kwon also misled investors about one of the most important aspects of Terraform’s offering – the stability of UST, the algorithmic stablecoin purportedly pegged to the U.S. dollar,(…) UST’s price falling below its $1.00 ‘peg’ and not quickly being restored by the algorithm would spell doom for the entire Terraform ecosystem, given that UST and LUNA had no reserve of assets or any other backing.”The suit said.
At the same time, they are also suspected of misleading investors about the stability of the UST, and the SEC filed a civil action in the United States District Court for the Southern District of New York.
The complaint alleges that Kwon and Terraform worked with a U.S. commercial company, which was not named, to restore UST’s fixed price after it dropped by nearly 10 cents in May 2021. this trading company buys a large amount of UST tokens. They received LUNA tokens from Terraform. That’s why after UST lost its peg, LUNA gradually fell to zero, and TFL collapsed quickly, leading to the mass bankruptcy of crypto companies.
Gurbir Grewal, director of enforcement at the SEC, said the project is “neither decentralized nor financial.” This is just a scam backed by so-called algorithmic stablecoins, and the defendants, not any code, control the price of stablecoins.
In South Korea, Do Kwon is also being searched and wanted by the authorities while investigating the giant cryptocurrency crash in history. The snags who founded the TFL are believed to be in Serbia, and Korean agents have also been sent to track his whereabouts.
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