Charges of investment fraud have been brought against the organisation and founder of the cryptocurrencies TerraUSD and Luna.
The Singapore-based Terraform Laboratories and Do Hyeong Kwon have been accused by the Securities and Exchange Commission (SEC) of breaching the anti-fraud and registration rules of the Securities Act and the Exchange Act, according to a news statement issued on Thursday, February 16.
According to the SEC’s press release, the companies allegedly misled investors looking to make a profit about the worth and stability of their products as they promoted securities backed by crypto assets to them.
The Wall Street Journal reported on Thursday that Kwon looks to be hiding out, that South Korean prosecutors have secured an arrest order for him, and that law enforcement agencies all over the world are seeking for him as a result of a notification from Interpol.
Before to its collapse in May, TerraUSD was the third-largest stablecoin by market valuation.
That month, TerraUSD fluctuated between $0.03 and $0.83 in a 24-hour period, which led to the implosion of the price of Luna, the algorithmic stablecoin’s companion token.
Luna started the month of May around $80 but on May 12 had lost almost all of its $29 billion market value, dropping to below $0.01.
Janet Yellen, the secretary of the U.S. Treasury, made the call for new stablecoin regulations after the events, telling the House Financial Services Committee, “I wouldn’t characterise it at this scale as a real threat to financial stability, but they’re growing very rapidly and they present the same kind of risks that we have known in connection with bank runs for centuries.”
In its news statement, the SEC said that Kwon and Terraform Labs had attempted to stop the regulator from learning details about their company during its inquiry.
In the statement, Gensler stated that the case “demonstrates the strength and devotion of the SEC’s committed public servants” and “demonstrates the extent to which certain crypto businesses would go to evade compliance with the securities laws.”
