US SEC files fraud lawsuit against Terraform Labs and DoKwon
“From at least April 2018 through May 2022 , Terraform and Kwon offered and sold crypto asset securities in unregistered transactions and perpetrated a fraudulent scheme that led to the loss of at least $40 billion of market value, including devastating losses for U.S. retail and institutional investors.”
Notably, the lawsuit has labeled both LUNA and UST as securities. And, the SEC is going after Terraform Labs and Do Kwon for multiple reasons. The court filings highlighted their role in the promotion of the Anchor Protocol, a yield-bearing protocol that promised a return of 19-20% interest.Additionally, the regulatory body has alleged that Do Kwon and the firm have “engaged in a fraudulent scheme to mislead investors about Terraform blockchain and its crypto asset securities.
However, in reality, the Chai payments never used the blockchain to process transactions. Do Kwon and Terraform Labs “deceptively replicated Chai” transactions in order to make it seem like the blockchain was deployed. In addition, the commission has alleged that the defendants misled investors about the stability of UST, the stablecoin pegged to LUNA.
The infamous de-pegging event, which turned into a death spiral, wiped off more than $60 billion from the market. And, the SEC claimed that this resulted in several US retail investors losing their life savings, while institutional investors took a billion-dollar loss. The lawsuit states, “The Commission seeks a final judgment: ordering permanent injunctions restraining and enjoining Defendants from again violating the federal securities laws described herein; ordering Defendants to pay disgorgement with prejudgment interest; ordering Defendants to pay civil money penalties”Subscribe to get it daily in your inbox.
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