The U.S. Securities and Exchange Commission (SEC) February 16th To Terraform Labs PTE Ltd. and its founder Do Kwon.
The SEC alleged that the defendants offered and sold cryptocurrency securities in unregistered transactions and carried out fraudulent schemes.
The regulator said:
“Defendants’ cryptocurrency securities offering included a series of interrelated tokens created, developed, promoted, offered and sold by Defendants as a profit-seeking investment.”
According to SEC filings, the defendants violated the securities offering registration requirements of the federal securities laws.
The SEC said Kwon and company sold securities to raise billions of dollars before various Terraform projects collapsed in May 2022.
Terraform Labs is best known for its heavily devalued Terra USD stablecoin (USTC), currently worth just $0.03 instead of the targeted $1.00 price peg. The project also sold other assets, including altcoins, now known as Terra Classic (LUNC, formerly LUNA), MIR or mirror tokens, and “mAsset” swaps tied to equity values.
The SEC complaint specifically accuses Kwon and Terraform Labs of selling cryptocurrency securities to profit-seeking investors and advertising that the assets will gain value. , meaning the team failed to deliver on its promise.
Today’s announcement only reveals the charges against the project. Terraform Labs and Kwon have not disclosed whether they intend to settle with the SEC, and the SEC has not disclosed the amount of any fines associated with a potential settlement.
Terraform Labs could be prosecuted in court as long as it is in operation, as Ripple and other companies have done. In fact, Terraform Labs previously attempted to sue the SEC in 2021 over how the SEC filed a subpoena against Kwon in public. But it’s unlikely the project will attempt a more ambitious battle against regulators now that they’ve collapsed and are hardly worth defending.
Despite that failure, Terra’s various original tokens and resurrected versions of LUNA are still trading on the market. The value of each asset is a fraction of its value prior to May 2022.