SEC alleged that Terraform and Kwon raised billions of dollars from investors by offering and selling an overlapping batch of crypto-asset securities, with multiple unregistered transactions, since May. 4 2018 until this plan collapsed in May 2022.
The suite of crypto asset securities included “mAssets” security-based swaps, which were designed to pay returns by mirroring the price of stocks of US companies, as well as Terra USD (UST), a crypto asset security referred to as an “algorithmic stablecoin” that supposedly maintained its peg to the U.S. dollar by being interchangeable for another of the defendants’ crypto asset securities, LUNA. The complaint also alleges that Terraform and Kwon offered and sold investors other means to invest in their crypto empire, including the crypto asset security tokens MIR, or “mirror” tokens, and LUNA itself.
The SEC added that Terraform and Kwon marketed these crypto-asset securities to investors looking to make a profit, repeatedly claiming that the tokens would increase in value.
“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,” SEC Chair Gary Gensler said in a statement. “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
Since the collapse of LUNA-UST, Kwon has deliberately evaded the Singapore and South Korean authorities. The South Korean government, which ordered Do Kwon’s arrest and canceled his passport, recently sent a representative to Serbia to continue the search for Do Kwon. The CEO of Terraform Labs was recently reported to be preparing his return to the cryptocurrency market.
Since the end of 2022, the SEC has continuously taken legal action against individuals / organizations that are considered to be improperly engaged in the cryptocurrency field, including former FTX CEO Sam Bankman- Fried and FTX’s FTT token, the lending company Genesis and the Gemini exchange, the attackers on Mango Markets, the Kraken exchange, and most recently, Paxos with Binance’s stablecoin BUSD.