With Sam Bankman-Fried, from FTX, in the custody of justice, America has been emboldened. The Securities and Exchange Commission (SEC) now he goes after Do Kwonthe person responsible for the other great crypto scandal of 2022: the collapse of UST and Luna.
In the last hours of yesterday, the North American organism formally accused the South Korean entrepreneur, and his firm Terraform Labs, of orchestrating a fraud valued at about 40,000 million dollars. The SEC alleges that both Do Kwon and his company repeatedly misled their investors by offering products under the promise that they could safely generate returns, and under the assumption that their assets would only increase in value.
How they did it? On the one hand, with an algorithmic stablecoin (UST) that could generate interest of up to 20% per year in dollars through the Anchor Protocol. On the other, artificially inflating the price of Luna, the native token of the Terra blockchain. The latter was the only thing that maintained UST’s parity with the dollar through a system of “burns” based on supply and demand. If you want to know more about how this disaster was generated, we explain it in greater detail in this article.
“We allege that Terraform and Do Kwon failed to provide full, fair and truthful disclosure to the public, as is required of a large number of crypto assets, most notably LUNA and Terra USD. We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses to investors.” Gary GenslerChairman of the SEC.
The lawsuit accuses Do Kwon and his company of violate the Securities Law and the United States Exchange Law. “The Terra ecosystem was not decentralized, nor was it finance. 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 said. Gurbir Grewaldirector of the SEC’s Division of Enforcement.
That the United States has now come out to accuse Do Kwon of a fraud of 40,000 million dollars, is not accidental. As we said at the beginning, the North American authorities have recently revitalized their cryptocurrency regulation plan. And they want to take advantage of the momentum of the FTX crash and the arrest of Sam Bankman-Fried to fall for another “big shot” of the sector.
However, the SEC faces the same problem as other agencies that want Do Kwon to explain: no one knows where it is. In September 2022, four months after the UST and Luna scandal, the first reports emerged that the businessman was on the run.
The South Korean court issued an arrest warrant for him for violating the Capital Market Law, but was unable to find him. His last whereabouts had been Singapore, where he had emigrated with his family. There he had a work visa valid until last December, but the singaporean police couldn’t find it either. And there were no records that he had left the city-state legitimately.
A game of cat and mouse
Thus began this game of cat and mouse. On Twitter, and appealing to his typical sarcastic tone, Do Kwon denied having run away and mocked the authorities. South Korea revoked his passport and hunted down his Bitcoin holdings to prevent further escape. While Interpol would have issued a red alert against him, although it is still not reflected on his website.
Rumors began to circulate in November that the founder of Terraform Labs may have smuggled into Europe. And while there was no immediate progress on the matter, this month the South Korean authorities began to kick the anthill. Bloomberg reported in the first days of February that officials from the Ministry of Justice of the Asian country they traveled to Serbiafollowing clues to Do Kwon’s supposed whereabouts.
For now, the former star of the crypto ecosystem has decided lower your exposure on social media. Since the beginning of the year has practically not tweeted. And what little he has interacted with the platform has been to respond to a very small handful of posts that mention him or relate to his old projects.