Feb 16, 2023 - Economy

SEC charges Terra's Do Kwon with defrauding investors

Photographer: Woohae Cho/Bloomberg via Getty Images

The U.S. Securities and Exchange Commission charged Terraform Labs and co-founder Do Kwon with fraud.

What's happening: The SEC's complaint alleges that from April 2018 until its collapse in May 2022, Terra and Kwon raised billions of dollars from investors "offering and selling an inter-connected suite of crypto asset securities."

Why it matters: While the crypto world has been balking at the suggestion that the SEC might be viewing stablecoins as securities—its latest complaint would appear to clear that up.

  • mAssets, swaps that were supposed to mimic the price of U.S. company stocks, the terra usd stablecoin and the Luna token were all cited in the complaint.

What they're saying: “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.

  • “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”

Flashback: Recall when terra usd depegged from the U.S. dollar in May, kicking off the first big crypto crisis of 2022.

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