The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Terraform Labs and its co-founder Do Kwon for allegedly misleading investors about the use of its TerraUSD stablecoin and the Anchor Protocol and LUNA token. The SEC is charging Terraform and Kwon with fraud, selling unregistered securities, selling unregistered security-based swaps and other related claims. The SEC alleges that Terraform and Kwon misled investors on a number of issues, including who was using TerraUSD for payments, and called both the yield-bearing Anchor Protocol and the LUNA token “crypto asset securities.” The SEC is seeking to have Terraform and Kwon disgorge their ill-gotten gains, pay civil penalties, and be permanently enjoined from future violations of the federal securities laws.
The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Terraform, a blockchain-based financial services company, and its CEO, Alex Kwon. The SEC alleges that Terraform and Kwon misled investors about the stability of UST, an algorithmic ‘stablecoin’ purportedly pegged to the U.S. dollar. According to the suit, UST’s price falling below its $1.00 ‘peg’ and not quickly being restored by the algorithm would spell doom for the entire Terraform ecosystem, given that UST and LUNA had no reserve of assets or any other backing. The SEC is seeking to impose civil penalties and disgorgement of ill-gotten gains against Terraform and Kwon.
Terraform and its CEO, Kwon Hyuk-joo, have been accused of making misleading statements about the restoration of TerraUSD’s peg to the dollar. The complaint alleges that the peg was restored due to the intervention of a U.S. trading firm, which bought large amounts of the UST token, and received LUNA tokens from Terraform in return. The collapse of TerraUSD last year caused a ripple effect of bankruptcies in the crypto industry, and the complaint seeks to hold Terraform and Kwon accountable for their alleged deceptive practices.
The US Securities and Exchange Commission (SEC) has filed charges against Terraform Labs, accusing them of fraudulently promoting a so-called “algorithmic stablecoin”. According to SEC Director of Enforcement Gurbir Grewal, the project was not decentralized or finance-related, but rather a fraud orchestrated by the defendants. Terraform Labs has denied any contact with the SEC and declined to comment. The SEC is seeking to impose civil penalties and disgorgement of ill-gotten gains from the defendants. This case serves as a warning to investors to be wary of projects that promise high returns with little to no risk.
