US regulators have charged the founder of Singapore-based Terraform Labs, Do Kwon, with orchestrating a multi-billion dollar securities fraud involving Terraform’s cryptocurrency tokens Terra Luna and TerraUSD, which collapsed last year. Kwon and Terraform Labs are accused of failing to provide the public with full, fair, and truthful disclosure, as required for a host of crypto asset securities, and committing fraud by repeating false and misleading statements to build trust before causing devastating losses for investors. The US Securities and Exchange Commission (SEC) alleges that Kwon and Terraform raised billions of dollars from investors by selling them an interconnected suite of crypto asset securities with many transactions being unregistered. The collapse of Terra Luna and TerraUSD is estimated to have cost investors more than $40bn.
The SEC complaint, which included other allegations, did not state where Kwon was located. In December, South Korean authorities, who have issued an arrest warrant for Kwon, said they believed he was in Serbia. Kwon faces charges of fraud and breaches of capital markets law in South Korea.
The collapse of Terra Luna and TerraUSD triggered a sell-off in major cryptocurrencies such as Bitcoin, Ethereum, and Tether, with the term “cryptocrash” trending online. Globally, investors in TerraUSD and Luna lost an estimated $42bn, according to blockchain analytics firm Elliptic.
Kwon, who has not yet responded to the charges, previously denied that he was in hiding but did not reveal his whereabouts. “For any government agency that has shown interest to communicate, we are in full cooperation and we don’t have anything to hide,” he said on Twitter. Last year, Kwon said, “I am heartbroken about the pain my invention has brought on all of you.”
Do Kwon is a South Korean businessman who co-founded Terraform Labs, a blockchain-based startup that wants to build a decentralized financial infrastructure. He is known for making the Terra network, which is a stablecoin backed by a basket of other cryptocurrencies.
Kwon worked as a software engineer for Microsoft and as a consultant for Deloitte before he started Terraform Labs. Later, he started several successful businesses, such as Anyfi Networks and Nomad Health, before co-founding Terraform Labs in 2018.
Some people praised Kwon’s work on the Terra network and stablecoin as a new way to deal with the volatility of cryptocurrencies. But the collapse of Terra’s tokens and the fraud and securities violations charges against Kwon and his company have hurt his standing in the industry.
Kwon has said that the collapse of the Terra network wasn’t his fault because he didn’t do anything wrong. Instead, he blames market forces that were out of his hands. He has also said that he is working with regulators and law enforcement officials in both South Korea and the US to resolve the charges against him and his company.
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