Well, if developments around the FTX collapse were not disastrously interesting enough, then we have Terra making its way back to the highlights again. It all started with TerraUSD slipping below the committed pegged ratio of 1:1 with the US Dollar and causing an effect on LUNA, followed by the entire crypto industry.
It has now been learned that the US Securities & Exchange Commission, SEC, has charged Do Kwon with the intention of defrauding customers with an investment crypto scheme.
According to a filing with the Southern District of New York, SEC has alleged that Do Kwon and Terraform Labs ran a multi-billion dollar fraud scheme of offering assets to customers that ultimately turned out to be unregulated securities. Do Kwon first raised funds in April 2018. This followed a series of raising rounds for which inter-connected digital assets were issued.
Do Kwon’s whereabouts are currently not known to the SEC. The last update was from South Korea, where the court issued an arrest warrant against him under the impression that he was residing in Singapore. The police searched for him but found no clue of his presence. Needless to say, he remains unavailable for comment to media questions.
TerraUSD was valued against LUNA even though it was supposed to be pegged 1:1 against the US Dollar. Another mistake committed by Terraform and Kwon was that they lied to their customers about the stability of the asset. Their claim was that the value would only increase in the times to come.
TerraUSD peaked at $18.5 billion in terms of market capitalization. It then came falling down like a pack of cards to lose the tenth position in the list of cryptocurrencies. It accelerated after slipping down from the pegged ratio of 1:1 with the US Dollar.
Not just Kwon but Terraform Labs also remains unavailable to answer the media’s questions. Hopes are high and running that either of them will make an appearance soon or at least issue a statement of assurance.
The SEC is not taking this well. Steps are only going to become stronger against the crypto industry. Gary Gensler, the SEC Chair, has highlighted that this case is a prime example of how far some crypto ventures are willing to go to avoid complying with regulations under relevant laws, adding that it also showcases the commitment of the SEC as dedicated public servants.
Investors in TerraUSD have lost $42 billion collectively from their portfolios. The turmoil has further spread to Celsius Network and Three Arrows Capital. Kraken is under scrutiny as well since the SEC has ordered it to stop its crypto-staking services. According to a Kraken review, the platform supports a limited number of cryptos, but they are all important because the service has already gained traction in the market.
Do Kwon and Terraform Labs have some questions to answer. Hopefully, the SEC should soon get hold of them to resolve the alleged fraudulent crypto scheme.