A lawsuit filed by the United States Securities and Exchange Commission said Terra Do Kwon and Terraform Labs co-founder laundered more than $100 million worth of Bitcoin from the platform after it collapsed in May 2022.
According to the SEC complaint filed in the US District Court for the Southern District of New York on February 16, Kwon and Terraform transferred over 10,000 Bitcoin (BTC) from the platform and the Luna Foundation Guard to a cold wallet, then to a Swiss bank account to be converted into fiat.The financial regulator said the Terra co-founder and his company could have access to more than $100 million in cash since withdrawals began in June 2022.
In addition to identifying Bitcoin stock, the SEC said Kwon and Terra artificially restored the dollar peg of TerraUSD (UST) – the stablecoin was one of the largest by market capitalization at the time of the release.collapse of the platform.According to the complaint, the platform solicited a third party to buy “massive amounts of UST to reestablish the $1.00 peg” when it fell below $1 in May 2021, misleading investors as to its stability and reliability:
“The price of UST falling below its $1.00 ‘peg’ and not being quickly restored by the algorithm would be catastrophic for the entire Terraform ecosystem, given that UST and LUNA n had no reserve of assets or any other support.”
The SEC also claimed that several of the tokens involved in Terra’s collapse were “securities of crypto assets” under its regulatory jurisdiction.According to the SEC, these tokens included UST, LUNA, and wrapped LUNA, as well as MIR tokens and mAssets developed under Terra’s Mirror protocol.
“Defendants solicited investors for these crypto assets by touting their profit potential,” the SEC said.“Defendants have repeatedly stated that the crypto assets will increase in value based on Terraform’s development, maintenance, and promotion of its blockchain, protocols, and the broader Terraform ecosystem.”
Terra’s business dealings were also a target of the financial regulator, as the SEC reported that Chai – a South Korean payment app linked to Terra at the time – “did not process or settle any transactions on the Terraform blockchain.“.On the contrary, Terra reportedly flagged transactions “that had already happened in the real world using Korean won” while telling the public that Chai had transacted on the blockchain.
“In at least five instances between October 2021 and March 2022, there were one or more days where no transactions were confirmed on the Terraform blockchain,” the SEC said.
“Yet there is no evidence that the Chai payment app was not working during these times.”
Related: ‘Wild’ – SEC in pursuit of Terra prompts responses from crypto lawyers
Kwon continued to be active on his Twitter following Terra’s collapse despite many crypto users blaming him for their loss of funds and the apparent “ripple event” leading to multiple bankruptcies amid the crypto crash of 2022.South Korean authorities reportedly sent two officials to Serbia to try to track down Terra co-founder.
At the time of publication, Kwon’s location is unknown..
