Do Kwon Reaches 5-star Wanted level as SEC Brings More Fraud Charges
The Securities and Exchange Commission (SEC) charges Terraform Labs and Do Kwon for orchestrating a multi-billion crypto asset securities fraud.
The SEC claims that Kwon misled many investors to purchase mAssets and LUNA.
Gary Gensler, the chair of SEC, said that Terraform and Labs broke securities laws of the United States.
Currently, Do Kwon is in hiding and SEC and other regulatory authorities are looking for him.
Keywords: Do Kwon, Luna collapse, luna crypto, Terra USD, UST, algorithmic stablecoin, SEC, Terraform Labs, mAssets, Terra blockchain
The United States government is taking a tough stance on individuals and institutions that carry out fraudulent crypto business activities. Currently, it has issued a charge against Do Kwon, the founder of Terraform labs for defrauding its citizens of billions of dollars in cryptocurrencies. However, since Do Kwon is hiding the US government is still looking for him.
The United States, through the Securities and Exchange Commission (SEC), alleges that Do Kwon, a South Korean national, misled the consumers through various means which include promising them return on the tokens they invested. He also assured the investors that their investment in both UST and LUNA were safe.
It is SEC’s case that between April 2018 and May 2022 Terraform Labs and Kwon raised billions of dollars by selling a suite of crypto assets, including mAssets, which were not registered. The mAssets were security based swaps that tracked the prices of United States stocks and UST. Some securities mirror the price of LUNA, one of Terraform crypto assets based on Terra Blockchain.
Read aslo: The Current Investigations on Terraform Labs and founder Do Kwon Following LUNA/UST Crash
The SEC further alleges that Kwon and Terraform Labs heavily advertised the products as safe investment assets and promised the investors that they would get high returns. As an instance, they advertised UST as a yield bearing crypto asset with a potential to earn up to 20% interest through the Anchor Protocol.
SEC charges Do Kwon - Aibcworld
The other charge is that Kwon and Terraform Labs lied to the investors that an established Korean mobile payment application used the Terra Blockchain to process its transaction, something that would push the price of LUNA up.
Read also: Do Kwon tried to escape South Korea before LUNA collapsed
Gary Gensler, the chair of SEC said, “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.”
He added, “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
Gensler confirmed the SEC’s commitment to fight fraudulent crypto activities when he said, “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.”
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement showed the gravity of Kwon and Terraform Lab actions when he said, “As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance. It was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.”
The charges, filed in the U.S. District Court for the Southern District of New York, points out that Kwon and Terraform Labs violated the “registration and anti-fraud provisions of the Securities Act and the Exchange Act,” making them liable for prosecution under its provision.
Who is Do Kwon?
Understanding who Do Kwon is and Terraform Labs helps to grasp the gravity of the case laid against them.
Do Kwon, Terra Founder- Nairametrics
Kwon Do-Hyung, popularly known as Do Kwon, is a South Korean entrepreneur who owns Terraform Labs - a Singaporean based FinTech firm that developed the Terra USD (UST) and LUNA - which collapsed in May 2022.
He attended his early education in South Korea before obtaining a BS in computer science at Stanford University in 2015. After acquiring higher education, the Terra founder worked as a software engineer at Microsoft and Apple. With this experience and expertise, Kwon together with Daniel Shin formed Terraform Labs in 2018.
The Collapse of Terra USD and LUNA
Terraform Labs created the Terra USD (UST), a stable coin, and LUNA on the Terra blockchain. UST, the algorithmic stablecoin, was pegged at a ratio of 1.1 to the United States dollar, meaning that it was not backed by any commodity.
The collapse of UST and LUNA started when Terra unstaked $2 billion worth of UST from the Anchor Protocol on 7 May 2022. That was followed by a huge sell-off of UST which resulted in its price to drop to $0.91.
As the selling pressure increased the UST depegged. In a desperate bid to anchor the price of UST the blockchain minted more LUNA, increasing its supply dramatically. As expected the price of LUNA dropped close to $0.00. Therefore, the collapse of LUNA became inevitable when many crypto exchanges delisted it.
Conclusion
The SEC charges Kwon with fraud for masterminding a multi-billion crypto asset securities fraud. The SEC claims that they misled the investors through their marketing information to invest in mAssets and Luna. Unfortunately, the Terra stablecoin (UST) was not backed by any fundamentals and assets.
