SEC Charges Singapore-Based Terraform Labs and Do Hyeong Kwon with Multi-Billion Dollar Crypto Asset Securities Fraud

The Securities and Exchange Commission has charged Terraform Labs PTE Ltd and Do Hyeong Kwon, both based in Singapore, with orchestrating an multi-billion-dollar crypto-asset securities fraud. The scheme involved an algorithmic stabilcoin and other cryptocurrency asset securities.

Terraform and Kwon, according to the SEC complaint, raised billions from investors between April 2018, and May 2022. They raised money by selling and offering a variety of crypto assets securities that were interconnected, some of which were not registered transactions. These securities included “mAssets,” The swaps were designed to mimic the prices of US stocks. Also included was Terra USD (UST), a crypto-asset security token that was designed to maintain the peg of the US dollar. It could be exchanged for LUNA. Terraform, Kwon, and other defendants offered investors additional ways to invest into their crypto empire. They included the crypto asset securities tokens MIR, and LUNA.

Terraform, Kwon and the SEC are accused of marketing these crypto asset securities by claiming they would increase in price. They promoted UST. “yield-bearing” Stablecoin was advertised as offering 20 percent interest via the Anchor Protocol. Terraform, Kwon and Kwon were also falsely accused in the complaint of misleading investors when they claimed that a popular Korean payment app used Terra blockchain to settle transaction that would benefit LUNA. Moreover, they allegedly supplied false information about the UST’s stability. In May 2022, UST was depegged from US dollars, causing the price to drop to near zero.

The complaint was filed at the Southern District of New York US District Court. The defendants face charges of violating sections of the Securities Act of 1929 and the Securities Exchange Act of 1974, as well rules related to them.

A team of investigators was supervised by SEC members from the Complex Financial Instruments, Crypto Assets and Cyber Units. The SEC Trial Unit is responsible for the litigation.

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SEC

Securities and Exchange Commission, or SEC for short, is the regulatory agency of the United States. It oversees and enforces securities laws. Its main mission is to protect and promote investors, ensure fair and efficient markets and encourage capital formation.

The SEC is responsible for a variety of tasks, such as regulating the securities sector, enforcing security laws, and monitoring the activities and securities market participants, such as brokers and dealers. The SEC also plays an important role in ensuring that investors receive accurate and timely information, which promotes transparency and prevents fraud on the securities market.

The SEC’s role is to review and approve registration statements of securities offerings such as initial publicly offered (IPOs) and ensure compliance with disclosure obligations. The SEC also regulates trading in securities on exchanges, other markets and monitors insider trades. It investigates possible violations of securities law.

The SEC also plays an important role in the enforcement of regulations relating to investment companies and advisers. It establishes rules and standards for such entities, performs examinations and takes enforcement action against those that violate rules.

The SEC is a crucial watchdog of the U.S. Securities Markets. It strives to protect investors, promote fair competition and maintain the integrity in the financial system.

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