SEC Sues Terraform Labs, Do Kwon for Misleading Investors on TerraUSD Stablecoin
The U.S. Securities and Exchange Commission (SEC) sued Terraform Labs, the company behind the failed TerraUSD stablecoin, and its co-founder Do Kwon on Thursday.
The SEC alleged that Terraform and Kwon misled investors on a number of issues, including who was using TerraUSD for payments, and called both the yield-bearing Anchor Protocol and the LUNA token “crypto asset securities,” according to the complaint. The SEC is charging Terraform and Kwon with fraud, selling unregistered securities, selling unregistered security-based swaps and other related claims.
“Terraform and Kwon also misled investors about one of the most important aspects of Terraform’s offering – the stability of UST, the algorithmic ‘stablecoin’ purportedly pegged to the U.S. dollar,” the suit said. “UST’s price falling below its $1.00 ‘peg’ and not quickly being restored by the algorithm would spell doom for the entire Terraform ecosystem, given that UST and LUNA had no reserve of assets or any other backing.”