The U.S. Securities And Exchange Commission (SEC) posted a press release titled: “SEC Charges Terraform and CEO Do Kwan with Defrauding Investors in Crypto Schemes”. From the press release (which was posted on February 16, 2023):
The Securities and Exchange Commission today charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stable coin and the crypto asset securities.
According to the SEC’s complaint, from April 2018 until the scheme’s collapse in May 2022, Terraform and Kwon raised billions of dollars from investors by offering and selling an intra-connected suite of crypto asset securities, many in unregistered transactions. These included “mAssets,” security-based swaps designed to pay returns by mirroring the price of stocks of US companies, and Terra USD (UST), a crypto asset security referred to as an “algorithmic stablecoin” that supposedly maintained its peg to the U.S. dollar by being interchangeable for another of the defendants’ crypto asset securities, LUNA.
The complaint further alleges that Terraform and Kwon offered and sold investors other means to invest in their crypto empire, including the crypto asset security tokens MIR – or “mirror” tokens – and LUNA itself.
The SEC’s complaint alleges that Terraform and Kwon marketed crypto asset securities to investors seeking to earn a profit, repeatedly claiming that the tokens would increase in value. For example, they touted and marketed UST as a “yield-bearing” stablecoin, which they advertised as paying as much as 20 percent interest through the Anchor Protocol.
The SEC’s complaint also alleges that, while marketing the LUNA token, Terraform and Kwon repeatedly misled and deceived investors that a popular Korean mobile payment application used the Terra blockchain to settle transactions that would accrue value to LUNA. Meanwhile, Terraform and Kwon also allegedly misled investors of the stability of UST. In May 2022, UST depegged from the U.S. dollar, and the price of it and its sister tokens plummeted to close to zero.
The Wall Street Journal reported that prosecutors in South Korea have obtained an arrest warrant for Mr. Kwon and a so-called red notice for him from global law-enforcement agency Interpol, effectively putting police agencies worldwide on the lookout for him.
According to The Wall Street Journal, Mr. Kwon is the developer behind two cryptocurrencies that crashed last year, wiping out the savings of investors who put their money there. Mr. Kwon appears to be in hiding.
CNBC reported that Kwon’s current whereabout are unknown, but the Terra co-founder was recently believed to be in Serbia, according to South Korean intelligence. Kwon is wanted in South Korea for his involvement in the collapse of Terra USD.
In my opinion, it would be a good idea for investors to take a closer look at cryptocurrency before they spend a bunch of money on it. In addition, people who create cryptocurrency should be a lot more careful about how they pitch their crypto to investors.