The year 2022 was full of great losses for the entire cryptocurrency industry. It saw major declines in the entire cryptocurrency industry but the worst thing that happened in the particular year was the crash of Terraform Labs.
It resulted in the crash of a major cryptocurrency, LUNA, and a major stablecoin, UST. Although the issue took place in May 2022, its contagion is still impacting the entire cryptocurrency industry.
The network’s crash resulted in major losses to the entire cryptocurrency industry. Major firms within the cryptocurrency industry faced huge losses and several firms ended up filing for bankruptcy.
While almost the entire crypto industry paid the price of Terra Network’s crash, the founder of the Terraform Labs, Do Kwon, roams freely.
The South Korean investors who had invested heavily in UST and LUNA were not happy with this. Therefore, went after him filing lawsuits against Terraform Labs and its founder.
Since then, the law enforcement authorities in South Korea have been after Do Kwon, trying to catch him and hold him answerable for the accusations made against him.
Despite several notifications, Do Kwon never appeared before the prosecutors and they were forced to ask Interpol for their assistance.
As of now, an international arrest warrant is circulating against Do Kwon. If he is found, he will be presented before the South Korean court for questioning.
US SEC has entered the Scene
Surprisingly, it is not just the South Korean authorities that are going after Do Kwon and Terraform Labs, the US SEC is determined to deal with them.
The latest reports have confirmed that the US Securities and Exchange Commission is now going after the founder of Terraform Labs.
Additionally, it is also going after the company he founded with accusations that they were involved in the creation of UST and LUNA.
The US regulator has accused the Terra ecosystem and its founder that they were involved in running a major fraud. They were involved in selling unregistered securities to the locals in the United States.
It has accused the cryptocurrency assets that the entities have been offering are unregistered. This means that the assets were unauthorized for selling in the United States.
By not registering these assets and then selling them to the US locals, the entities were involved in running a huge multi-billion dollar scam.
Complaint Filed at the US Court
As per the officials at the US SEC, they have gotten in touch with New York’s Southern District’s court for filing the complaint against Terraform and Kwon.
They have accused these entities of being involved in running scams and looting people of their investments in the process.
In the process, the fraudsters were able to lure investors from the institutional, retail, and private sectors.
They solicited investment products from the locals in the United States through multiple marketing channels with aim of scamming them.
Marketing of UST
As per the US SEC officials, the entities were involved in advertising their stablecoin yields to investors in the United States.
They claimed that the users based in the United States, owning the UST would be eligible to receive up to 20% interest on their holdings.
They advertised that the users could either dedicate their owned UST to the lending or borrowing protocols offered through their platforms to generate interest.
This way, they kept increasing the traction of their protocol and continued to offer more tokens to the users. With more users joining the protocols, soon the investments came in the form of billions of dollars.
Turns out, the UST was backed by an algorithm that was not able to hold its own and ended up crashing. It caused the trading price of the UST to crash tremendously, resulting in huge losses for investors.
Now that the US SEC is involved in the matter, it may become very difficult for Kwon and Terraform Labs to run away from possible arrests and legal actions.
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