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.

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