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The Securities and Exchange Commission indicted Terraform Labs PTE Ltd. and Do Hyeong Kwon on Thursday, alleging they conducted a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.
According to the SEC According to the complaint, from April 2018 until the company’s collapse in May 2022, Terraform and Kwon raised billions of dollars from investors by offering and selling an interconnected pool of crypto-asset securities, many in off-the-record transactions.
The SEC alleges that Terraform and Kwon traded crypto asset securities to investors looking to make a profit, claiming that the tokens would increase in value. In one example, they marketed UST as a “yield” stablecoin, which they advertised as paying up to 20% interest via the Anchor Protocol.
Bloomberg reported in June that the SEC was investigating Terraform Labs to determine whether it violated federal investor protection rules. In May, algorithmic stablecoin TerraUST (UST-USD) and its sister token Luna (LUNA2-USD) collapsed after the stablecoin lost its peg to the US dollar, wiping out billions of dollars in value. In May, the Terra ecosystem approved Kwon’s proposal to revive Luna through a new blockchain called Terra Classic.