US SEC charges Do Kwon and Terraform Labs for defrauding investors

Do Kwon, the Co-founder and CEO of Singapore-based crypto exchange company Terraform Labs, has found himself in trouble as the US regulators have charged him and his company for a multi-billion crypto asset securities fraud. Terraform Labs is known for its cryptocurrencies, TerraUSD and TerraLuna, which recently crashed, making investors lose billions of dollars. Based on reports regarding this crash, it is believed that investors have lost approximately a sum of $40 billion. The US SEC published this press release on their website, stating that Du Kwon potentially defrauded his investors through various schemes related to cryptocurrency through his company, Terraform Labs. 

Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC) said in this press release that Do Kwon did not provide full and fair disclosure regarding his cryptocurrencies TerraUSD and TerraLuna, to his investors. According to regulations by the US SEC, a host of any crypto asset securities is required to provide a full and fair disclosure that assists the public regarding all the rules and regulations of respective crypto assets. But Terraform Labs did not provide a thorough disclosure to their investors, thus keeping them blind regarding the operations of the company. The US SEC also accused Do Kwon and his company of using untruthful statements to build trust in the market and then using that trust to defraud investors later. 

The crypto market has so far been a birthplace for some of the largest financial scams to date. Many parties create a new cryptocurrency with the promise of returns in multiple folds. They promote this currency with some outrageous promises to lure in customers. And once their customer base grows to push their currency’s value to the sky, these promoters then sell their stake to earn tremendous profits, leaving the investors with nothing. This type of scam is called the pump-and-dump scheme, which has now become a common norm in the crypto space. 

Du Kwon and his company Terraform Labs have followed a similar concept. They first built their currencies, TerraLuna and TerraUSD, by creating trust amongst investors. But then the currencies crashed to being valued at almost zero in May of last year. As these currencies were some of the most well-known cryptocurrencies, their demise also affected the value of other popular currencies such as Bitcoin and Ethereum. This period was referred to as the biggest crash for the crypto market to date. During that time, the hashtag, Cryptocrash was trending on almost all social media platforms. 

One of the most surprising things was that the currencies, TerraLuna and TerraUSD, were both interlinked, which is never a good situation. TerraUSD was the first currency to sink, which then also pulled down TerraLuna. This was the reason that the crypto market crashed extensively, thus pushing potential crypto investors away from the market. Because of this, large cryptocurrencies such as Bitcoin and Ethereum fell to almost half of their previous value. Du Kwon, however, said that he is heartbroken learning what his investors have faced after the crash of the currencies he invented.