SEC charges Terraform Labs and CEO Do Kwon for orchestrating “multi billion dollar” crypto fraud
|- The Securities and Exchange Commission stated that Terraform and Do Kwon misled and deceived customers in the name of marketing LUNA.
- SEC Division of Enforcement Director Grewal was noted calling Terra ecosystem neither decentralized nor finance but a simple fraud.
- LUNA price dropped by more than 8% to trade at $1.81 following the news of SEC’s charges.
Terraform Labs, and its CEO, Do Kwon, were the highlights of Q2 and Q3 in 2022. The decentralized finance ecosystem collapsing led to the crypto market experiencing its first contagion before the events of FTX. The Securities and Exchange Commission (SEC) is finally taking action against the perpetrators.
SEC sues Terra and Do Kwon
In a press release on Thursday, SEC announced that it had charged Terraform Labs and its Chief Executive Officer (CEO), Do Kwon, with orchestrating a multi-billion dollar crypto fraud. As per the complaint, Terra and Kwon had been marketing crypto asset securities to its investors to earn a profit.
This led to the Commission claiming that along with marketing LUNA, Terraform and Kwon also misled and deceived investors. The SEC further charged the accused with misleading investors about the stability of its stablecoin UST, the de-pegging of which caused the market to crash as the rest of the tokens in the Terra ecosystem lost their value.
SEC Chair Gary Gensler, at the time of the press release, was noted saying,
“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors… 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.”
Filed in New York, the SEC charged Terra and Do Kwon with violating the registration and being anti-valued. In tune with this sentiment, Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, said,
“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.”
LUNA price dips again
LUNA price at the time of writing dropped by more than 8.2% to bring the trading price of the altcoin to $1.81. The cryptocurrency is nearing the immediate support at $1.67. Losing it would result in the altcoin flipping from support into resistance, and a decline to $1.48 is on the cards.
LUNA/USD 1-day chart
If LUNA price manages to bounce off the immediate support, it would be able to minimize the impact of the charges by climbing back to today’s highs and eventually testing the resistance line at $2.05.
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