Terraform Labs and Do Kwon have been charged with fraud by the SEC, nine months after LUNA's collapse.
On Thursday, the US Securities and Exchange Commission stated it was charging the Singapore-based firm and its CEO with "orchestrating a multi-billion dollar crypto asset securities fraud."
The SEC alleges that from April 2018 until the firm's collapse in May 2022, Terraform and Do Kwon raised billions of dollars through "an inter-connected suite of crypto asset securities, many in unregistered transactions."
These unregistered securities were marketed by Terraform's employees and Do Kwon to "earn a profit" and repeatedly claimed "the tokens would increase in value."
LUNA was also highlighted by the SEC, which claims that the Terraform ecosystem was "neither decentralized nor finance" but was "fraud popped up by a so-called “stablecoin” – the price of which was controlled by the defendants, not any code," as stated by Gurbir S. Grewal, director of the SEC’s Division of Enforcement
"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," said SEC chair Gary Gensler.
"We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors."
Specifically, the complaint filed in the U.S. District Court for the Southern District of New York, charges the defendants with violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
Do Kwon's location has been unclear since September last year after South Korea issued an arrest warrant for him following the crash of LUNA, the native token of the Terra ecosystem. Even Interpol Issued a Red Notice calling for law enforcement around the world to locate and arrest the crypto outlaw.
Just last week, a South Korean delegation went to Serbia to search for crypto villain Do Kwon.
Speaking to journalist Laura Shin in October, Do Kwon said about his location: “it’s not in the interest of let’s say, being on the run or something like that, that I don’t want to disclose where I live, it’s just that every time the location where it live becomes known, it becomes almost impossible for me to live there.”
LUNA met its demise in May when its sister stablecoin TerraUSD depegged from the US dollar. An estimated US$60 billion was wiped from the crypto space as a result.
Do Kwon was last seen on Twitter on 1 February, claiming he had "stolen no money and never had "secret cashouts" - happy to address specific allegations."
I find that Twitter is a good place for rumors but poor place to get facts— Do Kwon 🌕 (@stablekwon) February 1, 2023
I've stolen no money and never had "secret cashouts" - happy to address specific allegations
In any case, good day to you