Regulation

Further investigation of Terraform Labs by SEC

Further investigation of Terraform Labs by SEC

The US Securities and Exchange Commission is evaluating if the marketing of the Terra stablecoin TerraUSD (UST) was in violation of federal investor-protection regulations.

In a confidential probe, Terraform Labs is reportedly the subject of an investigation by the SEC, who are looking into the way that UST was marketed prior to the collapse of its algorithmic stablecoin. 

An unnamed source revealed to Bloomberg that SEC enforcement attorneys are looking into a possible breach of securities and investment products rules.

Terraform Labs is facing several legal battles, with the depegging of the UST stablecoin last month sending ripples through the crypto market, leaving the CEO Do Kwon scrambling to maintain investor support. 

Not only is the downfall of UST devastating for the company and its investors, but now Do Kwon and his company is the subject of numerous investigations, including money laundering allegations and scrutiny over its Mirror Protocol for which it is alleged the SEC handed him a subpoena during the Mainnet Conference in September 2021. 

Regarding the probe into money laundering, the SEC has reportedly uncovered proof that 100 billion Won of the company's monthly operating expenses were split between many crypto wallets, and the funds were transferred a month prior to the UST crash. 

Do Kwon has responded to the latest developments by the SEC, noting that he is unaware of ny additional investigation by the SEC, adding: 

“We are not aware of any SEC probes into TerraUSD at this time - we’ve received no such communication from the SEC and are aware of no new investigation outside of that involving Mirror Protocol”

The depegging of TerraUSD that began on May 7th has led to greater scrutiny of the crypto space by regulatory officials, leading many to wonder when the next lawsuit against a large crypto project will take place.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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