The Securities and Exchange Commission said Thursday that it has charged crypto entrepreneur Do Kwon, and the firm he co-founded called Terraform Labs, "with orchestrating a multi-billion dollar crypto asset securities fraud."
The collapse of Terraform Labs last year wiped out around $40 billion of investor money and rocked global crypto markets.
South Korean prosecutors previously asked Interpol to issue a red notice for Kwon, saying he refused to cooperate with the accident investigation.
On Thursday, the SEC alleged that from 2018 to 2022, Terraform and Kwon "raised billions of dollars from investors by offering and selling an interconnected pool of crypto asset securities, many in off-the-record transactions."
This included TerraUSD, a stablecoin that is said to maintain its peg to the US dollar by being exchangeable for another of the defendants' crypto asset securities, Luna.
The SEC's complaint also said that Terraform and Kwon "repeatedly misled and misled investors" that a popular Korean mobile payment app had used the Terra blockchain to settle transactions that would accumulate value for Luna, according to a statement.
"As alleged in our complaint, the Terraform ecosystem was neither decentralized nor funded," said Gurbir Grewal, director of the SEC's enforcement division.
"It was simply a fraud backed by the so-called algorithmic 'stablecoin', the price of which was controlled by the defendants, not by any code," he added.
Kwon's Terra/Luna system disintegrated in May of last year, and the price of both tokens plummeted to near zero. The fallout affected the broader crypto market.
Stablecoins are designed to have a relatively fixed price and are typically tied to a real-world commodity or currency.
Many investors lost their life savings when Luna and Terra entered a death spiral, and South Korean authorities opened multiple criminal investigations into the accident.
