The SEC has charged Terraform Labs with alleged'multi-billion dollar' cryptocurrency fraud

The SEC has charged Terraform Labs with alleged’multi-billion dollar’ cryptocurrency fraud

Terraform Labs is not the only entity facing attempts by foreign authorities to hold it accountable for a $40 billion collapse that cost investors dearly. The Securities and Exchange Commission has also charged Terraform and its CEO, Do Kwon, with securities fraud, alleging that they engaged in a “multi-billion dollar” crypto asset scam. According to the allegations, the blockchain business misled investors by falsely claiming that its TerraUSD asset was a stablecoin that offered high payouts tied to the US dollar (as high as 20 percent). Additionally, the company allegedly misled investors by suggesting that the Luna token would appreciate due to a Korean mobile payment app that utilized the Terra blockchain to settle transactions.

SEC Chair Gary Gensler stated that Terraform and Do Kwon failed to provide “full, fair, and transparent information” regarding their crypto asset securities. The charges include violations of the Securities Act and Exchange Act registration requirements, as well as anti-fraud offences.

In May 2022, TerraUSD and Luna lost their pegs to the US dollar, causing their values to plummet close to zero. Investors filed lawsuits alleging that Terraform and Kwon were operating a Ponzi scheme, and the freefall contributed to the collapse of the crypto hedge firm Three Arrows Capital. Binance, the cryptocurrency exchange, was also sued for allegedly improperly promoting TerraUSD as a secure asset. Although Kwon claimed he was not trying to evade arrest, he fled his home in South Korea, refused to answer investigators’ questions, and was subsequently placed on Interpol’s “red notice” list.

The SEC’s allegations are just the latest in a series of actions taken by some of the crypto industry’s most prominent players to combat suspected fraud. While authorities have primarily focused on investigating FTX and its creator Sam Bankman-Fried in connection with that exchange’s collapse, former Celsius Network CEO Alex Mashinsky is also under suspicion of defrauding investors. It is clear that governments are seeking improved enforcement of financial regulations in the cryptocurrency industry, even though the future of cryptocurrency remains uncertain.

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