SEC charges Do Kwon with collapse of Terra ecosystem
The U.S. Securities and Exchange Commission (SEC) finally filed charges against Terraform Labs and its CEO, The cryptoDo Kwon market continues to tumble in the wake of the events that led to the collapse of its algorithmic stablecoin, Terra USD (UST).
SEC files charges against Do Kwon and Terraform Labs
The SEC said that both Terraform Labs and Kwon raised billions by offering products deemed to be securities, referring to UST performance programmes and “mAssets”, securities-based exchange-traded products that derive dividends based on the share price of US companies.
Commenting on the move, SEC Chairman Gary Gensler said in a statement: “We allege that Terraform and Do Kwon failed to provide the public with full, fair and truthful disclosure as required for a large number of cryptoasset securities, especially for LUNA and Terra USD. We also allege that they committed fraud by making false and misleading statements to build confidence before causing devastating losses to investors.”
The SEC stated that “Terraform and Kwon repeatedly misled investors by claiming that a popular Korean mobile payment app used Terra’s blockchain to settle transactions that would accrue value for LUNA. Meanwhile, Terraform and Kwon also allegedly misled investors about UST’s stability.
The fall of the Terra ecosystem
The collapse of the Terra ecosystem was one of the most catastrophic events for the crypto market in 2022, which collapsed when the UST stablecoin lost parity with the US dollar as the LUNA token, which served as collateral to maintain its value, fell.
The effects were quite catastrophic for investors and enthusiasts as the UST token was used in various staking programmes, so users’ funds were locked up while everything was happening at an alarming rate. The losses incurred prompted many people to take legal action against Do Kwon and Terraform Labs, who could do little to keep the Terra ecosystem afloat.
Although the Terra network was relaunched, the reputational consequences did not help the project gain a second wind. Faced with imminent legal action, Do Kwon resorted to anonymity despite remaining active on his main social networks, but some reports indicated that the developer had fled to Serbia to elude the authorities, as he was even wanted by international agencies.
