Terra blockchain protocol’s creator and co-founder, Do Kwon, is being sued by the US Securities and Exchange Commission for securities fraud in connection with last year’s market collapse, which caused over $40 billion in losses.
According to a statement by the Chairman of the US Securities and Exchange Commission, Gary Gensler, Terraform Labs 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 TerraUSD.
He also added that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.
:format(webp)/cdn.vox-cdn.com/uploads/chorus_asset/file/24438820/1240079964.jpg)
The SEC has stated that Mr. Kwon and his company sold “an interconnected suite of crypto asset securities” to investors, raising billions of dollars, with numerous unregistered transactions.
In September 2022, South Korea issued a warrant for the arrest of Kwon, while Interpol issued a “red notice” to locate him. Although Kwon denies being on the run, his current whereabouts are unknown, and South Korean police reportedly traveled to Serbia this month to find him.
Do Kwon, along with co-founder Daniel Shin, established Terraform Labs in 2018, which led to the launch of the Luna cryptocurrency later that year. Luna was designed to be used within the Terra blockchain ecosystem, which aimed to facilitate decentralized finance and increase access to financial services. Luna was pegged to the value of a basket of fiat currencies, and its adoption grew rapidly, with the currency seeing a significant increase in market value. However, the SEC alleges that Kwon and his company engaged in fraudulent practices, which ultimately led to Luna’s crash and the significant losses suffered by investors.
In his home country of South Korea, Do Kwon also faces charges of violating capital markets laws and committing fraud.