Finally, SEC's Verdict Of Do Kwon Dalangi Fraud In Cryptocurrency

The founder of Terra LUNA, Do Kwon, is being hunted by the South Korean government in Serbia. (Photo; Doc. BeinCrypto)

JAKARTA - Securities and Exchange Commission (SEC) has accused Terraform Labs and CEO Do Kwon of allegedly "absorbing" cryptocurrency securities fraud. These allegations were made nearly a year after the Terra USD algorithmic stablecoin lost its benchmark and resulted in the loss of tens of billions of dollars in investor money.

On Thursday 16 February, a regulator complaint was filed in the Southern District of New York accusing Kwon and Terraform Labs of two federal securities charges. The SEC stated that Terraform and Kwon should have registered a number of their crypto assets with the SEC as securities, including crypto exchanges on the underlying equity.

According to regulatory statements, Do Kwon and Terraform Labs allegedly raised billions of dollars from investors over a four-year period by offering and selling "a series of securities of interconnected crypto assets." Kwon allegedly offered and sold unregistered securities, including token-backed stocks, Terra USD algorithmic stablecoins, and LUNA's brother tokens. The SEC estimates that Kwon sold the opportunity to investors to "invest in their crypto empire."

According to the SEC, Kwon is responsible for the loss of US$40 billion (approximately Rp608 trillion) in the crypto market, including losses to US retail and institutional investors. From April 2018 to May 2022, Terraform and Kwon are said to have marketed tokens they claim will increase in value. The SEC also said that LUNA's marketing deceived investors that the asset was used by the Korean payment app giant, using the Terra blockchain to complete transactions and collect additional LUNA in the process.

The defendants "aggressively marketed" Terraform cryptocurrencies to US investors by "posting information and promotional materials to accounts on several publicly accessible online social media platforms, such as Twitter accounts, blog posts, YouTube, and messaging apps like Telegram," according to the SEC. The regulator's complaint also states that Kwon owns 92% of Terra's shares and makes "misleading statements" about Terra USD's stability and is explicitly aware of the stablecoin's "structural weakness".

Do Kwon, who has Red Notice Interpol for his arrest, has been a fugitive since the collapse of Terra last year. The location is unknown. This South Korean native also received an arrest warrant from the Seoul District Attorney's Office four months after the Terra explosion. Terraform employees including Nicholas Platias, former head of research at Terra, and staff member Han Mo also received an arrest warrant at the time.