The U.S. Securities and Exchange Commission (SEC) is charging the founder of embattled stablecoin issuer Terra (LUNA) with defrauding investors in “crypto schemes.”
In a new press release, the SEC is formally announcing charges against Do Kwon, the disgraced former chief executive of Terra, for allegedly masterminding a multi-billion-dollar fraud scheme centered around Terra’s now-defunct algorithmic stablecoin, TerraUSD.
The regulatory agency alleges that from April 2018 until the Terra ecosystem’s downfall in May 2022, Kwon illegally raised billions of dollars by defrauding investors by selling them tokens, such as TerraUSD, which they claimed would increase in value.
The complaint also claims that Kwon also misled investors by lying about the stability of TerraUSD as well as it being a yield-bearing asset that gained 20% interest through the Anchor Protocol.
The SEC further alleges that Kwon, whose last known whereabouts were in the Balkan nation of Serbia according to the South Korean authorities searching for him, lied to investors that a prominent Korean mobile payments app used LUNA’s blockchain to settle transactions.
As stated by SEC Chair Gary Gensler,
“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. We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors…
This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws, but it also demonstrates the strength and commitment of the SEC’s dedicated public servants.”
The Terra ecosystem collapsed last year after TerraUSD depegged from the US dollar, causing both it and LUNA to crash over 99.99%.
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