Breaking: SEC sues Do Kwon and Terraform Labs for fraud
"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," said SEC chair Gary Gensler.
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The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Terraform Labs and its founder Do Kwon for allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”
In a Feb. 16 statement, the SEC said Kwon and Terraform offered and sold an “inter-connected suite of crypto asset securities, many in unregistered transactions.” It pointed to its now collapsed algorithmic stablecoin, TerraClassicUSD (USTC) and its connected cryptocurrency Terra Luna Classic (LUNC).
The SEC also took issue with mAssets, crypto derivatives that mirror the stock price of publicly listed companies and Terraform’s issuance of Mirror (MIR) — a governance token for the Mirror protocol which lists mAssets.
In a statement, SEC Chair, Gary Gensler, alleged Kwon and Terraform “failed to provide the public with full, fair, and truthful disclosure” particularly for USTC and LUNC — formerly named Terra (LUNA) and TerraUSD (UST), and added:
“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
The SEC filed its complaint in the U.S. District Court for the Southern District of New York with charges relating to violations of the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
Gensler commended the SEC’s staff on their investigation and alleged: “The defendants attempted to prevent us from obtaining important information about their business.”
Related: Korean e-commerce exec accused of accepting LUNA for shilling Terra Labs
“This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws,” he added.
This is a developing story, and further information will be added as it becomes available.