Terraform boss charged over multi-billion-dollar crypto fraud

Singapore-based crypto business Terraform Labs and its chief executive have been charged by US regulators for a multi-billion-dollar fraud scheme.

The Securities and Exchange Commission (SEC) said that Terraform boss Do Hyeong Kwon defrauded investors in a scheme involving an algorithmic stablecoin and other crypto asset securities.

The financial watchdog claims that from April 2018, until the scheme’s collapse in May last year, Terraform and Kwon raised billions of dollars from investors by offering and selling an “interconnected suite of crypto asset securities”, many in unregistered transactions.

"We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD," said SEC chair Gary Gensler. "We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors."

The regulator says that these asset securities included mAssets, or security-based swaps designed to pay returns by mirroring the price of stocks of US companies, and Terra USD (UST), a crypto asset security dubbed an “algorithmic stablecoin”.

The company supposedly marketed these assets to investors to earn a profit and claimed that the tokens would increase in value. But in May 2022, UST depegged from the US dollar and its price plummeted to close to zero along with its sister tokens.

The US authority also alleges that the company and its chief executive offered and sold investors other means to invest in crypto, including the crypto asset security tokens MIR—or “mirror” tokens—and LUNA itself.

The complaint, which was filed in the US District Court for the Southern District of New York, said that while marketing the LUNA token, Terraform and Kwon repeatedly misled and deceived investors that a popular Korean mobile payment application used the Terra blockchain to settle transactions that would accrue value to LUNA.

    Share Story:

Recent Stories


Data trust in the AI era: Building customer confidence through responsible banking
In the second episode of FStech’s three-part video podcast series sponsored by HCLTech, Sudip Lahiri, Executive Vice President & Head of Financial Services for Europe & UKI at HCLTech examines the critical relationship between data trust, transparency, and responsible AI implementation in financial services.

Banking's GenAI evolution: Beyond the hype, building the future
In the first episode of a three-part video podcast series sponsored by HCLTech, Sudip Lahiri, Executive Vice President & Head of Financial Services for Europe & UKI at HCLTech explores how financial institutions can navigate the transformative potential of Generative AI while building lasting foundations for innovation.

Beyond compliance: Building unshakeable operational resilience in financial services
In today's rapidly evolving financial landscape, operational resilience has become a critical focus for institutions worldwide. As regulatory requirements grow more complex and cyber threats, particularly ransomware, become increasingly sophisticated, financial services providers must adapt and strengthen their defences. The intersection of compliance, technology, and security presents both challenges and opportunities.

Unleashing generative AI: A force multiplier for financial crime teams
This FStech webinar, sponsored by NICE Actimize sees industry experts examine the revolutionary impact of generative AI on financial crime operations, and provides actionable insights to enhance your compliance strategies.