SEC Charges Terraform Labs and Do Kwon for Alleged Fraudulent Scheme, Leading to $100 Million Crypto Cash-Out and Token Dump
The US Securities and Exchange Commission (SEC) has alleged that Terraform Labs and its founder, Do Kwon, transferred over 10,000 BTC to a cold wallet and cashed out about $100 million via a Swiss Bank.
The regulator filed a complaint on Feb. 16 alleging that the accused offered unregistered securities and operated a fraudulent scheme. The SEC has called for the trial of Do Kwon and Terraform for allegedly operating a fraudulent scheme that wiped out over $40 billion from the crypto market in May 2022.
Further analysis of the SEC filing revealed that Do Kwon and Terraform Labs transferred over 10,000 BTC into a cold wallet and subsequently converted some of the assets to cash. “On a periodic basis since May 2022, Terraform and Kwon have transferred- and continue to transfer- Bitcoin from this wallet to a financial institution based in Switzerland and have converted the Bitcoin to cash,” the SEC filed. The regulator disclosed that between June 2022 and February, over $100 million in cash has been withdrawn from the Swiss Bank.
Do Kwon’s whereabouts remain unknown as authorities around the world have placed him on red alert. South Korean officials confirmed to have made a trip to Serbia following an intelligence report on his possible location. The allegations and the call for trial have been significant enough to shake the Terra ecosystem.
Terra-related Tokens Dump as SEC Labels Them Securities
Terra-related tokens lost an average of 5% in the last 24 hours following the SEC’s charges against Terraform Labs and Do Kwon.
According to Coingecko’s data, Terra-related tokens have lost their value in the last 24 hours following the SEC’s charges against Terraform Labs and Do Kwon. In the Feb. 16 complaint, the SEC alleged that Terra’s failed algorithmic stablecoin TerrraUSD (USTC), LUNC, and Wrapped LUNA Classic (WLUNC) were securities under U.S. securities laws.
The financial regulator further argued that Terraform Labs breached securities law with the Mirror Protocol (MIR) launch. MIR allowed users to create mAssets, constituting a security-based swap, according to the SEC. The SEC added that the wrapped version of Luna was also security.
Terra-related tokens have lost their value in the last 24 hours following the SEC’s charges against Terraform Labs and Do Kwon. USTC plunged by 6.7% during the reporting period to $0.02852. Since losing its U.S. Dollar peg in May 2022, the community members have failed to help it regain its value through various propositions. LUNC fell 4% during the reporting period to $0.00017, which is 100% below its all-time high of $104.73. The sell-off has also seen its market cap drop below $1 billion — it currently stands at $993.2 million.
Meanwhile, the ecosystem’s new blockchain LUNA also saw its native token decline 5.4% to $1.87. The new blockchain network has not enjoyed as much success as the previous one, as the community remains wary of the ecosystem. Its market cap stood at $409 million.
The allegations and the call for trial have brought serious challenges to Terra’s token value and future prospects. In the short term, it remains to be seen how the regulatory charges will play out in court and how the community will react.
However, the incident is a reminder of the importance of transparency and compliance with regulatory frameworks in the crypto industry. As the industry continues to grow and attract more mainstream attention, it is crucial for companies and individuals to be mindful of their responsibilities and obligations under the law.
Read more:
- Do Kwon Is Currently Based In Serbia
- Do Kwon Cashed Out 9.64 Bitcoin From LFG After Fleeing To Serbia
- Korea Sent People To Serbia To Track Down Do Kwon
- SEC Charges Terraform And CEO Do Kwon With Multi-Billion Dollar Crypto Securities Fraud