The U.S. securities regulator has accused Do Kwon, the inventor of the defunct Terra stablecoin of fraud

According to a lawsuit filed in the Southern District of New York, the U.S. Securities and Exchange Commission (SEC) accused Singapore-based Terraform Labs and its CEO Kwon Do-hyung of defrauding investors via “a multi-billion dollar crypto asset securities scheme.”

SEC Chair Gary Gensler said in a press release that the agency “alleges that Terraform and Do Kwon refused to present the public with complete, fair, and true information as required for a range of crypto asset securities, most notably for LUNA and Terra Dollar.” We claim that they engaged in fraud by making a series of untrue and deceptive claims to potential investors in order to gain their confidence.

The SEC asserts that Kwon and Terraform illegally offered and sold crypto asset securities, including the algorithmic stablecoin TerraUSD and mAssets, which are tokens that replicate the price of U.S.-based equities.

The agency further says that Terraform and Kwon mislead investors by claiming that a major South Korean mobile payment application uses Terra blockchain in order to increase the value of the LUNA coin.

According to our allegation, Terraform was not decentralized nor financially viable. It was only a hoax supported by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants and not by any code, said Gurbit S. Grewal, director of the SEC’s Division of Enforcement, in a news statement.

Do Kwon, the leader of Terraform Labs, is believed to be living in Serbia. The week before, prosecutors in Seoul informed Forkast that Serbian authorities had agreed to “actively assist” with the investigation and extradition of Kwon.

Terraform Labs’ crypto project, once valued at $40 billion, failed in May of last year when the Terra stablecoin was depegged and the value of its sister cryptocurrency, Luna, plummeted to zero from about US$120.

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