The United States Securities and Exchange Commission (SEC) finally pounced on the team behind the failed TerraUSD (UST) stablecoin project — TerraForm Labs — and its founder/ CEO Do Kwon. The SEC alleges that the defendants manipulated the price of UST, citing that “the Terra ecosystem was neither decentralized nor finance.”
A fresh report showed that the Gary Gensler-led SEC filed a lawsuit against Do Kwon and TFL on Thursday over the failure of UST — now represented as USTC — in May 2022. This adds to the list of different individual and class action lawsuits slammed against the on-the-run CEO, Do Kwon.
Particularly, the securities watchdog charges the above-mentioned defendants because they disobeyed the registration and anti-fraud provisions of the Securities Act and the Exchange Act. The SEC filed the crypto lawsuit in the U.S. District Court for the Southern District of New York
The SEC contends that the Singapore-based blockchain company and its CEO orchestrated a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin (UST) and other crypto asset securities.
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,” said SEC Chair Gary Gensler. “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
Per the update, the financial regulator which recently fined Kraken $30 million for offering an unregistered security staking program added that “Terraform and Kwon raised billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions.”
Notably, this lawsuit comes nine months after TerraClassicUSD (USTC), formerly known as TerraUSD (UST) depegged and lost parity with a dollar due to an error in project management and many other unclear factors.
The dramatic collapse of this supposed stablecoin led to the massive plunging of its sister token LUNA (now called LUNC). Roughly $40 billion was lost in the immediate Terra ecosystem whereas the incident wiped out about 60 billion dollars from the broader crypto market.
The present woes of Celsius Network, Voyager Digital, and Three Arrows Capital (3AC) were caused by the depegging of UST. Hopefully, the SEC is able to get justice for the many victims of the Terra ecosystem meltdown.
LUNC is yet to recover from the historic crash it recorded. But the project which is now community-led is slowly revitalizing as many notable developments surround it including the Terra Classic token burning initiative to reduce the asset’s total supply to 10 billion and staking to increase token scarcity.
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