The U.S. Securities and Exchange Commission (SEC) charged Singapore-based Terraform Labs and its chief Kwon Do-hyung with defrauding investors through “a multi-billion dollar crypto asset securities fraud,” according to a complaint filed in the Southern District of New York.

See related article: South Korea prosecutors say Serbia ready to help fraud investigation into Terra’s Do Kwon

Fast facts

  • “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, in the agency’s announcement of the filing. “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
  • The SEC claims Kwon and Terraform raised billions through an unauthorized offering and selling of crypto asset securities, including the TerraUSD algorithmic stablecoin and mAssets, which are tokens that mirror the price of U.S.-based stocks. 
  • The agency further alleges Terraform and Kwon deceived investors by saying that a popular mobile payment application in South Korea used Terra blockchain, in order to add value to the LUNA cryptocurrency.
  • “As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance. It was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code,” Director of the SEC’s Division of Enforcement Gurbit S. Grewal said in the SEC’s press release
  • The Terraform Labs chief, typically known as Do Kwon, is known to be residing in Serbia. Last week, Seoul prosecutors told Forkast that Serbian authorities have agreed to “actively cooperate” with the investigation and expatriation of Kwon.
  • Terraform Labs’ crypto project, once valued at US$40 billion, collapsed in May of last year following the depegging of the Terra stablecoin and the value of its sister Luna cryptocurrency plunged to zero from around US$120. 

See related article: Why is it harder to arrest Terra-Luna founder Do Kwon than FTX’s Sam Bankman-Fried?