United States SEC Charges Singapore-Based Terraform & Founder Do Hyeong Kwon for Defrauding Investors in Multi-Billion Crypto Asset Securities Fraud & Crashed LUNA, Advertised as Yield-Bearing Stablecoin Paying 20% Interest
23rd February 2023 | Hong Kong
The United States Securities & Exchange Commission (SEC) has charged Singapore-based Terraform Labs and founder & CEO Do Hyeong Kwon for defrauding investors in the multi-billion crypto asset securities fraud & the crashed cryptocurrency LUNA, including advertising the yield-bearing stablecoin paying 20% interest. United States SEC: “According to the SEC’s complaint, from April 2018 until the scheme’s collapse in May 2022, 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. These included “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. The complaint further alleges that Terraform and Kwon offered and sold investors other means to invest in their crypto empire, including the crypto asset security tokens MIR—or “mirror” tokens—and LUNA itself. The SEC’s complaint alleges that Terraform and Kwon marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value. For example, they touted and marketed UST as a “yield-bearing” stablecoin, which they advertised as paying as much as 20 percent interest through the Anchor Protocol. The SEC’s complaint also alleges that, while marketing the LUNA token, 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. Meanwhile, Terraform and Kwon also allegedly misled investors about the stability of UST. In May 2022, UST depegged from the U.S. dollar, and the price of it and its sister tokens plummeted to close to zero.” More info below:
“ United States SEC Charges Singapore-Based Terraform & CEO Do Hyeong Kwon for Defrauding Investors in Multi-Billion Crypto Asset Securities Fraud, Advertised as Yield-Bearing Stablecoin Paying 20% Interest “
United States SEC Chair Gary Gensler: “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 United States SEC Division of Enforcement: “ 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.”
United States SEC Charges Singapore-Based Terraform & Founder Do Hyeong Kwon for Defrauding Investors in Multi-Billion Crypto Asset Securities Fraud & Crashed LUNA, Advertised as Yield-Bearing Stablecoin Paying 20% Interest
16th Feb 2023 – According to the SEC’s complaint, from April 2018 until the scheme’s collapse in May 2022, 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. These included “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.
The complaint further alleges that Terraform and Kwon offered and sold investors other means to invest in their crypto empire, including the crypto asset security tokens MIR—or “mirror” tokens—and LUNA itself. The SEC’s complaint alleges that Terraform and Kwon marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value. For example, they touted and marketed UST as a “yield-bearing” stablecoin, which they advertised as paying as much as 20 percent interest through the Anchor Protocol.
The SEC’s complaint also alleges that, while marketing the LUNA token, 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. Meanwhile, Terraform and Kwon also allegedly misled investors about the stability of UST. In May 2022, UST depegged from the U.S. dollar, and the price of it and its sister tokens plummeted to close to zero.
The complaint, filed in the U.S. District Court for the Southern District of New York, charges the defendants with violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
The investigation was conducted by Roger Landsman, Elisabeth Goot, Kathleen Hitchins, James Murtha, Daniel Koster, Donald Battle, and David Crosbie and was supervised by Reid Muoio, Osman Nawaz, Jorge Tenreiro, and David Hirsch from the Complex Financial Instruments and Crypto Assets and Cyber Units. The litigation is being handled by James Connor, Ladan Stewart, Devon Staren, and Laura Meehan from the Trial Unit.
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