The SEC has charged Kwon and TFL with defrauding unsuspecting crypto investors.
The Securities and Exchange Commission has announced charges against TerraForm Labs (TFL) and its founder, Do Kwon, for allegedly defrauding investors in what the regulator tagged a multi-billion dollar cryptocurrency fraud.
The SEC alleges that Kwon and his company raised billions of dollars from unsuspecting investors by offering unregistered securities from April 2018 to May 2022.
U.S. SEC says Terra (LUNA), Terra USD (UST), and Mirror token (MIR) are unregistered securities.
Today we charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.
— U.S. Securities and Exchange Commission (@SECGov) February 16, 2023
Charges Filed Against Kwon and TFL
Notably, the SEC further alleged that the defendants advertised these unregistered securities to trusting investors while assuring them that the tokens’ value would surge tremendously in the future.
Gary Gensler, the chairman of the SEC, alleged that the defendants failed to provide the public with fair and honest disclosure “required for a host of crypto asset securities.”
Gensler added: “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
Commenting on the development, Director of the SEC’s Division of Enforcement Gubir S. Grewal said the action is aimed at holding the defendants accountable for the collapse of the Terra ecosystem, which sent shock waves to the entire crypto market.
Kwon’s Whereabouts Still Unknown
It bears mentioning that the SEC did not indicate Kwon’s current address. Recall that last year, Korean authorities issued an arrest warrant for Kwon, who was alleged to be living in Singapore. However, Singaporean authorities revealed that the founder of TFL was not in the country. Recent reports suggest that Korean authorities are looking for Terra’s founder in Serbia with no luck. At press time, Kwon’s current address is still unknown.
The charges come several months after TheCryptoBasic reported that the SEC was investigating whether Kwon and TFL violated U.S. securities laws via the sale of USTC and LUNC. It is worth noting that Kwon is also facing securities charges in South Korea.
While the U.S. SEC and South Korean authorities allege that Kwon and TFL offered unregistered securities, the company has maintained that they did not violate any securities laws.