Terra/LUNA charged with multi-billion dollar fraud: “Neither decentralized, nor finance”

Rick Steves

“As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance. It was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.”

It was widely expected that the Securities and Exchange Commission would eventually sue Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon after the collapse of Terra/LUNA last year – the event that triggered an ongoing domino effect within the realm of crypto.

The SEC has now finally charged the abovementioned defendants with orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.

SEC says Terraform and Kwon repeatedly misled and deceived investors

Terraform and Kwon raised billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, including “mAssets,” security-based swaps designed to pay returns by mirroring the price of stocks of US companies, and Terra USD (UST), a crypto asset security referred to as an “algorithmic stablecoin” that supposedly maintained its peg to the U.S. dollar by being interchangeable for another of the defendants’ crypto asset securities, LUNA.

According to the US regulator, Terraform and Kwon marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value. The SEC noted, for example, that UST was marketed as a “yield-bearing” stablecoin, which they advertised as paying as much as 20 percent interest through the Anchor Protocol.

While marketing the LUNA token, the SEC alleges that Terraform and Kwon repeatedly misled and deceived investors that a popular Korean mobile payment application used the Terra blockchain to settle transactions that would accrue value to LUNA. The defendants also allegedly misled investors about the stability of UST, taking into account that UST depegged from the U.S. dollar in May 2022, with the price of it and its sister tokens plummeting to close to zero.

“The lengths to which some crypto firms will go to avoid complying…”

SEC Chair Gary Gensler, said: “We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD. We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.

“I commend the SEC’s hard-working staff who remained vigilant in such an important investigation, even when the defendants attempted to prevent us from obtaining important information about their business. This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws, but it also demonstrates the strength and commitment of the SEC’s dedicated public servants”.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, added: “Today’s action not only holds the defendants accountable for their roles in Terra’s collapse, which devastated both retail and institutional investors and sent shock waves through the crypto markets, but once again highlights that we look to the economic realities of an offering, not the labels put on it. As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance. It was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.”

Read this next

Digital Assets

Bitget Wallet Leads with Record Swap Volume & New Crypto Innovations

This week, Bitget Wallet achieved a milestone by surpassing Metamask with a record 388,757 Swap order transactions, securing the global lead. The significant 7-day trading volume, almost 68,000 more than its rival, underscores its liquidity and user trust. This robust activity signals Bitget Wallet’s prominent role and reliability in the dynamic crypto market.

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

Digital Assets

BlockDAG Presale Raises $9.9M as Batch 5 Nears Sell-Out Amid Bonk’s Fluctuating Trading Volume & Spell’s Bullish Price

Explore BONK’s trading volume, SPELL’s market shifts, and why BlockDAG’s 10,000 ROI makes it an ideal crypto for savvy investors in 2024.

Digital Assets

Bybit expands into Europe amid regulatory scrutiny

Dubai-based cryptocurrency exchange Bybit is expanding its operations in Europe after encountering regulatory challenges in Hong Kong.

Digital Assets

Cathie Wood’s sponsored Bitcoin ETF sees historic $200 million inflows

The ARK 21Shares Bitcoin ETF (ARKB), co-sponsored by Cathie Wood’s ARK Invest, registered historic inflows exceeding $200 million on Wednesday, signaling a robust appetite among investors for Bitcoin-centric investments.

Digital Assets

Sam Bankman-Fried might see his 25-year sentence halved

Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, was sentenced to 25 years in federal prison by a Manhattan court on Thursday. This comes after he was convicted of defrauding customers and investors, with Judge Lewis Kaplan highlighting the potential future risks posed by Bankman-Fried.

<