SEC charges Do Kwon, Terraform Labs with securities fraud

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The Securities and Exchange Commission (SEC) has charged Terraform Labs and its founder and CEO, Do Kwon, with defrauding investors.

At the beginning of May 2022, the $60 billion Terra blockchain ecosystem collapsed over a matter of days after its algorithmic stablecoin, Terra USD, lost its crucial $1 price peg and experienced a bank run.

“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,” said SEC Chair Gary Gensler.

As the complaint alleges, from April 2018 to May 2022, Terraform and Kwon raised billions of dollars from investors by offering an “inter-connected suite crypto asset securities, many in unregistered transactions.”

Those assets included security-based swaps designed to mirror the price of stock of U.S. companies and Terra USD the algorithmic stablecoin and the Terra ecosystem’s native cryptocurrency, LUNA.

Gensler said the agency also alleges both Terraform and Do Kwon committed fraud by repeating false and misleading statements…

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