Securities and Exchange Commission (SEC) The United States has accused the cryptocurrency company Terraform Labs of implementing fraudulent schemes.
A separate charge of committing an activity fraudulent nature using cryptocurrency was brought against the company’s CEO Do Kwon.
The supervisory authority claims that in the period from April 2018 to 2022, when attracting investment funds, the company used the offer of interconnected digital assets as a pretext, most of which were not registered following the established procedure.
The firm is accused of misleading investors who believed that they were channeling their funds into securities with digital assets, including an algorithmic stablecoin that was supposed to preserve value against the US dollar.
According to the supervisory authority, Do Kwon promoted a crypto token that would be interchangeable with LUNA, a Terra security, and told investors false information that the value of their token would rise.
SEC Chairman Gary Gensler stated that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure of information, as is required for many crypto asset securities, primarily for LUNA and Terra USD. He also noted that the company caused significant damage to investors, having previously gained their trust through a profitable offer.
Gurbir S. Greval, director of the SEC’s Enforcement Division, said that the current proceedings not only hold the defendants accountable for their role in the collapse of Terra, which devastated both retail and institutional investors and caused shock waves in the crypto markets, but also emphasizes that the regulator is monitoring economic realities. He stated that the Terraform ecosystem was neither decentralized nor financial.
As we have reported earlier, SEC Proposes Tougher Rules for Crypto Custodians.