• The US Securities and Exchange Commission (SEC) has filed a lawsuit against Terraform Labs, the company behind the failed TerraUSD stablecoin, and its co-founder Do Kwon.
• The SEC alleges that Terraform and Kwon misled investors on a number of issues, including who was using TerraUSD for payments, and called both the yield-bearing Anchor Protocol and the LUNA token “crypto asset securities”.
• The SEC is charging Terraform and Kwon with fraud, selling unregistered securities, selling unregistered security-based swaps, and other related claims.
SEC Sues Terraform Labs & Do Kwon
The US Securities and Exchange Commission (SEC) has filed a lawsuit against Terraform Labs, the company behind the failed TerraUSD stablecoin, and its co-founder Do Kwon. The SEC alleges that Terraform and Kwon misled investors on a number of issues, including who was using TerraUSD for payments.
Allegations of Misleading Investors
The SEC claims that both the yield-bearing Anchor Protocol as well as the LUNA token have been labeled as “crypto asset securities” by them. Furthermore, they allege that Terraform & Kwon made misleading statements about how UST’s peg to the dollar was restored after it fell nearly 10 cents in May 2021. As compensation for helping to restore UST’s peg back to $1 USD level at that time, they received LUNA tokens from Terraform.
Charges Brought Against Them
The SEC is charging both entities with fraud; selling unregistered securities; selling unregistered security-based swaps; as well as several other related charges. This marks yet another example of how companies operating within crypto space need to be extra careful when it comes to making public statements or taking certain actions which could be viewed as being misleading or fraudulent by regulators.
Consequences of Collapse
The collapse ofTerraUSD last year led to a wave of bankruptcies in crypto industry due to many users relying heavily on this stablecoin—many of whom were not prepared for such an event happening so suddenly without any warning signs beforehand.
It remains uncertain what will happen next in this case but one thing is clear—investors should be wary when dealing with projects claiming to offer investors any kind of return or profit opportunities with their crypto assets/tokens/coins—as those could very easily fall under the jurisdiction of regulatory bodies like the SEC if found out to violate certain rules/regulations set forth by them.