The SEC is suing Terraform Labs and its co-founder, Do Kwon, for misleading investors on several aspects of the business.
The collapse of Terraform's stablecoin, Terra USD, caused a wave of bankruptcies in the crypto industry in 2022.
- UST,
as the cryptocurrency was known, earned the trust of many crypto users
that believed that it was pegged to the U.S. dollar. This gave investors
peace of mind as they were led to believe that regardless of what
happens with other currencies, UST was going to have a stable price.
- Once
the currency started to drop below $1 and could not recover, panic
started to spread among investors, who sold their tokens very quickly,
causing UST's price to drop even further.
- The SEC claims that
Terraform tried to manipulate the market by giving a U.S.-based trading
firm large amounts of LUNA tokens after the firm had bought a
considerable amount of UST.
- Terraform Labs went bankrupt soon after this event, while Kwon is currently hiding in Serbia to avoid trial, according to South Korean prosecutors.
