- The United States Securities and Exchange Commission has expanded its investigation against the company Terraform Labs and its founder Do Kwon.
- The SEC, which was already investigating the company for its Mirror protocol, is now also seeking certainty about its business practices.
- Furthermore, he accuses Do Kwon of withdrawing $80 million per month before the UST stablecoin collapses and loses its peg to the dollar.
Although the crypto community left Terraform’s legal problems in the background due to the fall in markets, the company is accumulating more and more problems with its founder Do Kwon.
According to Bloomberg, the United States Securities and Exchange Commission (SEC) has extended its investigation to the company that owns the Terra ecosystem to learn more about its business practices. This comes after the SEC targets the Mirror protocol and after the implosion of TerraUSD (UST) and the LUNA token.
In detail, sources cited by Bloomberg state that the SEC’s Enforcement Division is investigating whether Terraform Labs violated investor protection rules through the marketing of LUNA and UST.
Terraform research progresses
Terraforms first came to the attention of regulators late last year, after investigating the connection of an alleged illegal sale of unregistered securities through the Mirror protocol. That investigation seeks to find out if the company violated federal securities law when it traded tokens representing synthetic shares through that platform.
Kwon disagreed with the SEC and filed a lawsuit alleging that the agency has no jurisdiction over the company as it is based in Singapore. Similarly, a court in the United States ruled in favor of the SEC and now the founder of Terraform must collaborate with the agency by providing testimonies and documents on the operation of Mirror Protocol.
Let us remember that last month UST lost its stable parity with the dollar causing havoc in Luna, which plummeted more than 99%. To relaunch the project, Terraform sought to put the failed stablecoin behind it, creating a new token and renaming the original Luna Classic (LUNC).
The released report states that the SEC’s new line of investigation aims to investigate whether Do Kwon’s company breached investor protection provisions by falsely marketing UST as a 1:1 reliably pegged stablecoin. with the US dollar.
An important accusation against Do Kwon
Both Bloomberg and the South Korean daily JTBC reported (without citing specific sources) that the SEC has allegedly discovered that Do Kwon had been withdrawing about $80 million of Terraform funds monthly before the UST and LUNA crash. The report details that “funds flowed into dozens of cryptocurrency wallets owned by Kwon.”
