A complaint filed with the United States Securities and Exchange Commission says Terra founder Do Kwon and Terraform Labs laundered more than $100 million in 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 have transferred more than 10,000 Bitcoin (BTC) from the platform and the Luna Foundation Guard to a cold wallet, then to a Swiss bank account to convert it to fiat. The financial regulator said Terra founders and their companies could have access to more than $100 million in cash from when withdrawals begin in June 2022.
In addition to identifying the stockpile of Bitcoin, the SEC said Kwon and Terra artificially restored the TerraUSD (UST) peg dollar – the stablecoin has been one of the largest by market capitalization at the time the platform collapsed. According to the complaint, the platform asked third parties to buy “too much US to restore the $1.00 peg” when it falls below $1 in May 2021, misleading investors about its stability and reliability:
“The price of UST falling below the $1.00 ‘peg’ and not recovering quickly by the algorithm will spell doom for the entire Terraform ecosystem, as UST and LUNA have no other asset reserves or support.”
The SEC also claims some of the tokens involved in Terra’s collapse are “crypto asset securities” that are subject to regulation. According to the SEC, these tokens include UST, LUNA and packaged LUNA, as well as MIR and mAsset tokens developed under the Terra Mirror Protocol.
“The defendants solicited investors for these crypto assets citing potential profits,” the SEC said. “The defendants have repeatedly stated that their crypto assets will increase in value based on the development, maintenance, and promotion of the blockchain, protocol, and the entire Terraform ecosystem.”
Terra’s business connections were also targeted by financial regulators, as the SEC reported Chai — a South Korean payment app linked to Terra at the time — “did not process or complete transactions on the Terraform blockchain.” Further, Terra is accused of reporting transactions “that have taken place in the real world using Korean Won” while claiming to the public that Chai transacted on the blockchain.
“On at least five occasions between October 2021 and March 2022, there was one or more days when no transaction of any kind was confirmed on the Terraform blockchain,” the SEC said. “However, there is no evidence that Chai’s payment app was not working during that time.”
The SEC accused Do Kwon of fraud — and the charges included how he lied about the Terra-Chai relationship.
In October, I grilled people on fake Chai transaction data as well.
Full interview here: https://t.co/xZyRGFBYnh pic.twitter.com/iQ4XT8q7X7
— Laura Shin (@laurashin) February 17, 2023
related: ‘Wild’ – SEC follows Terra pulls responses from crypto lawyers
Kwon continued to be active on his Twitter account after the collapse of Terra even though many crypto users blamed him for the loss of funds and the “ripple event” that led to multiple bankruptcies amid the crypto crash of 2022. South Korean authorities reportedly sent two. officials to Serbia in an attempt to track down Terra co-founder. At the time of publication, Kwon i’s location was unknown.