Nearly a year after the demise of Terra and the UST stablecoin, the SEC is taking action. This is the latest in a series of regulatory hammers that the Securities and Exchange Commission has brought to the pavement on crypto lately.
Terraform Labs once operated what it considered to be the dominant decentralized stablecoin UST – and built a strong defi ecosystem before the card collapsed in the first half of 2022. While Terraform Labs founder and CEO Do Kwon maintains the sanctity of the public platform, respect Terra’s. fallout from the targeted attack on the network, the SEC will present a formidable challenge to Kwon and his company to present their case – perhaps for the first time.
SEC Suits: What We Know
A press release from the commission that hit the wire had details that the US Commission has charged Kwon and Terraform Labs with “orchestrating a multi-billion dollar crypto asset securities fraud” through the UST stablecoin algorithm and environmental securities.
The document starts with Mirror – a decentralized platform built on Terra that allows users to trade mirror assets of real securities. At one point in the early days of the Mirror, some users were ‘looping’ assets with influence based on the securities there traded on the federal exchange. The press release directly mentions the MIR Mirror token, the UST stablecoin, and Luna’s native LUNA token.
Additionally, the press release dives into Terra’s flagship product, Anchor. Anchor is the bread and butter of the ecosystem, touting a clean and straightforward UI and a consistent 20% interest rate on the UST stablecoin. At its peak before Terra’s collapse, Anchor was a multi-billion dollar liquidity spot. The SEC’s complaint alleges that Kwon and Terraform Labs “misled and deceived investors” on various topics, including the stability of UST.
Terraform Labs platform token, Luna (LUNA), faced it's demise in 2022 in one of the largest ecosystem downfalls in crypto to date. | Source: LUNA-USD on TradingView.com
Gensler: Cracking The Whip
In a statement included in the release, the head of the Securities and Exchange Commission Gary Gensler claimed that Kwon and Terraform Labs “failed to provide the public with complete, fair, and honest disclosure as required for crypto asset securities, especially for LUNA and Terra USD.” The director of the commission’s Enforcement Division, Gurbir S Grewal, added that “The Terraform ecosystem is not decentralized, nor is finance. This is simply a scam powered by an algorithmic “stablecoin” – the price of which is controlled by the defendants, not any code.
In a statement included in the first report by Bloomberg, Terraform Labs did not comment, saying only that the company “has not been contacted about the process by the SEC and therefore cannot comment.”
Kwon, who has become known for his confident and arrogant approach on Twitter, has not been seen on the platform for more than two weeks and has long maintained – on Twitter, in his podcast appearances, etc. – that he is “not running away.” despite the swirling discussion. about the Interpol red notice. Now, there is little question about the veracity of the claim.