According to reports, the U.S. Securities and Exchange Commission is investigating Terraform Labs and the fall of algorithmic stablecoin terrausd. “SEC enforcement lawyers are investigating whether Terraform Labs broke securities rule.
Bloomberg reported Thursday that the U.S. SEC is looking into Terraform Labs’ algorithmic stablecoin terrausd UST, citing people familiar.
In May, UST lost its peg against the U.S. Dollar. The stablecoin soon lost its value, and it collapsed along with cryptocurrency terra (LUNA). Do Kwon (CEO Terraform Labs) created both coins. He has launched LUNA 2.0 since then.
According to the publication, the SEC is looking into whether the marketing of UST prior to its crash violated federal investor protection regulations. SEC enforcement lawyers are looking into whether Terraform Labs violated securities and investment product rules.
Legislators in different countries began to investigate stablecoin regulation after the implosion of both cryptocurrencies. Janet Yellen, the U.S. Treasury Secretary, stated that regulation of stablecoins was urgent. Gary Gensler, Chairman of the SEC, stated that many crypto tokens would fail.
Kwon is already under scrutiny by the SEC regarding the Mirror Protocol. Terraform Labs’ CEO Kwon and its subpoenas were issued Wednesday by the SEC. The court has rejected Kwon’s appeal.
Concerning the SEC investigation, Terraform Labs, a Singapore-based company, stated that it wasn’t aware of any SEC investigation into UST. Kwon stated that they are unaware of any SEC probes into Terrausd at the moment – it has not received any communication from them and is aware of no other investigation besides that involving Mirror Protocol.
Experts in legal matters don’t expect Kwon to face federal criminal charges. They believe it is more likely that he will face civil charges as well as regulatory penalties.
Kwon’s homeland in South Korea has initiated an investigation into the collapse and terrausd. Kwon and Terraform Labs co-founders have been sued in a class-action suit. Seoul police are also investigating whether Terraform Labs employees embezzled company’s bitcoin.
Terraform Labs had a South Korean subsidiary. Kwon dismantled it just days before the collapses of UST/LUNA.