Reports said that the United States Securities and Exchange Commission has filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”
It has been reported that in a Feb. 16 statement, the SEC said that Kwon and Terraform offered and sold an “inter-connected suite of crypto asset securities, many in unregistered transactions.” The agency pointed to Terraform Labs’ now-collapsed algorithmic stablecoin, TerraClassicUSD (USTC), and its connected cryptocurrency, Terra Luna Classic (LUNC).
However, the SEC also took issue with mAssets, crypto derivatives that mirror the stock price of publicly listed companies, and Terraform’s issuance of Mirror (MIR), a governance token for the Mirror protocol that lists mAssets.
Gary Gensler, the chair of SEC, said in a statement that Kwon and Terraform “failed to provide the public with full, fair, and truthful disclosure,” particularly for USTC and LUNC, which were formerly named Terra (LUNA) and TerraUSD (UST).
He added:
“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
The report said that the SEC filed a 55-page complaint in the US District Court for the Southern District of New York with charges relating to violations of the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
In the complaint, the SEC said that Terraform and Kwon “touted and marketed” its Anchor Protocol, which at one point was advertised to pay out 20% interest on USTC deposits. It also alleged Terraform and Kwon misled investors about the stability of Terra’s stablecoin.
Thus, last May, USTC lost its peg to the US dollar, causing its price — and the price of LUNC — to effectively collapse to zero. This resulted in a wider collapse in the digital asset market that wiped out an estimated value of $40 billion.
Source: Cointelegraph