Some major collapses in recent times have resulted in big changes in the crypto market. US SEC has been following these developments as the events continue to evolve. One of these is the collapse of the algorithmic stablecoin TerraUSD whose fall initiated a chain reaction of the collapse of other big names. The collapse took place on 9 May 2022, and since then, there has been continuing instability in the market. The result of this instability is losses of millions for investors who have tried to stick hard to their assets.
Other major collapses include the fall of FTX, whose CEO, Sam Bankman-Fried, was soon extradited to the US after the collapse of the company. Thus, law enforcement agencies have continued to get closer to the alleged fraudsters. One of these is DO Kwon, who has been charged by the US SEC recently.
Here is a brief overview of the recent developments regarding the charges against Do Kwon.
The collapse of stablecoin UST Terra
The collapse of UST on 9 May 2022 raised brows because of its claims of stability. Since its launch in 2018, there have been claims that it is linked to an algorithm that maintains 1:1 parity with US Dollar. Do Kwon was the primary developer behind these coins. He and other developers were able to attract multi-billion-dollar investments claiming that UST is a stablecoin.
Furthermore, they brought mAssets, which were security-based swaps designed for US investors. These assets were exchangeable for their other asset LUNA. Thus, many mirror assets were brought to the investors, which were not ‘stable’ in true terms. In addition to that, the company claimed that the assets were yield-bearing that could earn as much as 20% interest through Anchor Protocol.
But all this was dashed to the ground on 9 May 2022 when Terra wasn’t able to maintain its 1:1 peg. Prior to the collapse of TerraUSD, its market cap value was about $18.5 billion, making it the biggest stablecoin. Its market cap value was reduced considerably due to its inability to retain its value. While globally, customers lost about $42 billion as a result of the decline of LUNA and Terra UST.
SEC charges against Do Kwon and Terraform Labs
SEC has charged Do Kwon and his company with fraud and other crimes. SEC has filed a case in the court of the Southern District of New York. The charges include violation of the registration from the defendants and placed anti-fraud provisions of the Securities and the Exchange Act. Various SEC officials were involved in the investigation and were praised by Gary Gensler for their dedication.
The SEC complaint includes the details of the transactions that would include the misguidance of customers regarding the use of LUNA. The allegation added that Terraform Labs was unable to provide the full and fair details of the happenings and thus kept the customers in the dark. Gary Gensler said that the companies prevented access of information to the investigators, but they were able to obtain it.
He added that some companies had prevented access to true information, but civil servants have remained committed to their job. He further said that Terra’s ecosystem was neither decentralized nor finance. Thus, the shock waves will continue for a while.
The US SEC has placed charges against Do Kwon, the former head of Terraform Labs. These include various charges of fraud and other crimes. SEC has filed a case in the US District Court for the Southern District of New York. The press release from the organization listed the details of the events and case filing. The further procedure is expected to take place shortly.