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    Home»Crypto»Do Kwon, the founder of Terra, has been charged with fraud in connection with the $40 billion crypto crash.
    Crypto

    Do Kwon, the founder of Terra, has been charged with fraud in connection with the $40 billion crypto crash.

    The collapse of Terra was an early step in crypto's 2021 slide, but Kwon is now reportedly missing.
    NxtvertexBy NxtvertexFebruary 17, 2023Updated:February 17, 2023No Comments2 Mins Read
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    Do Kwon
    IMAGE CREDITS: [Bloomberg]
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    Following last year’s meltdown that reverberated throughout the cryptocurrency industry, the US Securities and Exchange Commission is suing the creator of the defunct Terra blockchain protocol for securities fraud. Terraform Labs and its co-founder Do Kwon “perpetuated a fraudulent scheme that resulted in the loss of at least $40 billion in market value,” according to the SEC’s complaint.

    South Korea issued an arrest warrant for Kwon in September, while Interpol reportedly issued a “red notice” for him or a request to international law enforcement agencies to “locate and provisionally arrest a person pending extradition, surrender, or similar legal action.” Despite Kwon’s assurances that he is “not on the run,” the complaint states that “his current address is unknown.” Earlier this month, South Korean police reportedly travelled to Serbia in an attempt to locate him.

    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

    Kwon co-founded Terraform Labs with Daniel Shin in 2018 and later that year launched the cryptocurrency Luna. In 2020, the company launched TerraUSD, an algorithmic stablecoin linked to Luna to help maintain its dollar peg. As a result, when TerraUSD began to crash last year, so did Luna, vaporising the billions of dollars thrown at the cryptocurrencies by hopeful investors.

    The SEC accuses Terraform and Kwon of misleading investors about the stability of TerraUSD, noting that the coin’s price falling below its dollar peg “would spell doom for the entire Terraform ecosystem.” Furthermore, the agency claims that Kwon and Terraform misled their customers by falsely claiming that Chai, a Korean electronic mobile payment app, used the Terraform blockchain to process payments.

    “In reality, Chai payments did not use blockchain to process and settle payments,” according to the lawsuit. “Defendants deceptively replicated Chai payments onto the Terraform blockchain to give the impression that they were occuring on the Terraform blockchain when, in fact, Chai payments were made through traditional means.”

    “We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a variety of crypto asset securities, most notably LUNA and Terra USD,” says SEC Chair Gary Gensler in a statement. “We also allege that they committed fraud by repeatedly making false and misleading statements in order to gain trust before causing investors to suffer catastrophic losses.”

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