The SEC accuses Kwon of diverting 10K units of Bitcoin from Terra.
The Securities and Exchange Commission (SEC) has alleged that Terra co-founder Do Kwon and TerraForm Labs (TFL) were involved in money laundering following the ecosystem collapse in May 2022.
SEC’s Complaint Against Kwon
The SEC made this known in a 55-page complaint filed in the Southern District Court of New York, stating that the defendants laundered more than $100 million worth of Bitcoins.
The SEC cited one transaction, which saw Kwon and TFL move over 10K Bitcoin from the Luna Foundation Guard (LFG) and Terra to a cold wallet. The funds were later transferred to a Swiss bank account and converted to fiat. The Securities and Exchange Commission claims the defendants withdrew over $100 million from the unnamed Swiss financial institution since May 2022 using this process.
“On a periodic basis since May 2022, TFL and Kwon have transferred – and continued to transfer – Bitcoin from [LFG and TerraForm platform] to a financial institution based in Switzerland and have converted the Bitcoin to cash. Between June 2022 and the date of this complaint, over $100 million in fiat has been withdrawn from that Swiss account,” it noted.
Furthermore, the SEC also alleged that the defendants misled investors by artificially restoring the dollar peg of its algorithmic stablecoin, TerraUSD (UST). According to the SEC, the defendants asked a third party to acquire vast amounts of UST to keep the stablecoin’s price pegged to the dollar.
“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,” the SEC’s complaint read.
SEC Officially Charged Kwon
The development comes a day after the SEC charged Kwon and TFL with fraud and conducting unregistered securities offerings. The SEC noted that several crypto assets involved in the Terra ecosystem, including UST, LUNA, and MIR, are securities that fall under its regulatory purview.
Meanwhile, following the collapse of the Terra ecosystem, Kwon’s whereabouts are still unknown. Since South Korean authorities issued an arrest warrant for Kwon, law enforcement agents globally are yet to apprehend him.
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