Do Kwon, LUNA and Terra Founder, Must Face Fraud Allegations from SEC
In Brief
On Monday, July 31, a federal judge in the Southern District of New York stated that Do Kwon must face fraud allegations brought by the U.S. Securities and Exchange Commission.
Do Kwon is the founder of the algorithmic stablecoin Luna and blockchain network and the algorithmic stablecoin Terra, both issued by Terraform Labs.
On Monday, July 31, a federal judge in the Southern District of New York stated that Do Kwon must face fraud allegations brought by the U.S. Securities and Exchange Commission.
Do Kwon is the founder of the algorithmic stablecoin Luna and blockchain network and the algorithmic stablecoin Terra, both issued by Terraform Labs. TerraUSD is a coin that is supposed to maintain a 1:1 peg to the US dollar. The value, however, was derived from a pair with another token, Luna. In contrast to stablecoins USDC (USD Coin) and USDT (Tether), Terra and Luna were not backed by actual dollars or assets stored in physical banks.
Launched in 2018, TerraUSD became the tenth-largest cryptocurrency. Nevertheless, in early May 2022, Luna and Terra’s prices crashed and have not recovered since. UST (Terra) was de-pegged from the dollar, and holders started selling it in panic. Luna Coin followed, resulting in a $60 billion loss for holders. The case is still thought of as the largest cryptocurrency fraud in history.
In September 2022, South Korean authorities issued a warrant for Kwon and five other individuals, including Nicholas Platias, a founding member of Terraform Labs, and the company’s employee Han Mo.
In March 2023, Do Kwon and Han Chang Joon, Terraform Labs’ Chief Financial Officer, were arrested at the Podgorica airport in Montenegro with forged documents.
In May, the State Prosecutor’s Office in Podgorica appealed against the previous court decision to release Do Kwon and Han Chang Joon on bail of €400,000 (approximately $439,500 at the time of writing). The individuals stayed under house arrest at Chang Joon’s residence in Montenegro.
Finally, on July 31, the U.S. Securities and Exchange Commission introduced a complaint about Terraform Labs and Do Kwon having misled investors about the stability of TerraUSD. In a ruling, Judge Jed S. Rakoff of the Federal District Court in Manhattan wrote that the regulator can move forward with the allegations.
“…Will continue to fight the SEC’s misguided and deeply flawed allegations and legal theories,”
said a Terraform Labs spokesperson, according to Reuters.
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About The Author
Valeria is a reporter for Metaverse Post. She focuses on fundraises, AI, metaverse, digital fashion, NFTs, and everything web3-related. Valeria has a Master’s degree in Public Communications and is getting her second Major in International Business Management. She dedicates her free time to photography and fashion styling. At the age of 13, Valeria created her first fashion-focused blog, which developed her passion for journalism and style. She is based in northern Italy and often works remotely from different European cities. You can contact her at [email protected]
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Valeria is a reporter for Metaverse Post. She focuses on fundraises, AI, metaverse, digital fashion, NFTs, and everything web3-related. Valeria has a Master’s degree in Public Communications and is getting her second Major in International Business Management. She dedicates her free time to photography and fashion styling. At the age of 13, Valeria created her first fashion-focused blog, which developed her passion for journalism and style. She is based in northern Italy and often works remotely from different European cities. You can contact her at [email protected]
