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Home»ALTCOIN NEWS»Do Kwon’s Fallout: Terraform Labs Shuts Down After $4.47 Billion in Fines
ALTCOIN NEWS

Do Kwon’s Fallout: Terraform Labs Shuts Down After $4.47 Billion in Fines

By Crypto FlexsJune 18, 20243 Mins Read
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  • The closure of Terraform Labs and the $4.47 billion SEC settlement have revealed the consequences of cryptocurrency fraud.
  • The incidents involving Kwon, Zhao and Bankman-Fried highlight the need for increased scrutiny of cryptocurrencies.

While the successful launches of various cryptocurrency projects have been making headlines, the downfalls of some failed cryptocurrency companies have also attracted much attention.

The Fall of Terraform Labs

Terraform Labs, now led by CEO Chris Amani, announced its closure following a significant $4.47 billion settlement with the SEC.

This turn of events has focused attention on Do-Do Kwon, founder of Terraform Labs, which developed one of the popular US-pegged stablecoins.

Kwon’s trajectory, once riding high with massive venture capital and billions of dollars worth of his coins Terra and Luna, now faces similar scrutiny as other notable figures in the cryptocurrency space.

Giving further insight into this, a reporter from ‘The Street’ noted:

“Last April, a jury unanimously found Mr. Kwon and Terra Labs guilty of securities fraud. Mr. Kwon went into hiding for years after the implosion of two digital stablecoins, Luna and Terra.”

The reporter revealed the reason for Terrform Labs’ downfall, adding:

“While stablecoins are based on actual physical assets, Kwon’s coin appears to be based on a complex web of code. “When the algorithm failed in 2022, $40 billion in market value was wiped out.”

The scam included misleading investors about the stability of Terraform’s blockchain and its cryptocurrency UST.

When UST lost its peg to the U.S. dollar in May 2022, its value and that of Terraform’s other tokens plummeted, wiping out about $40 billion in market value.

Gensler’s frustration with this issue

This resulted in significant financial losses for investors, including retail investors who trusted Terraform Labs’ disinformation, further accelerating the collapse of hedge funds and sending investors running for the exits.

SEC Chairman Gary Gensler expressed concern about this in a press release:

“This case confirms what the courts have said: Economic realities, not a product’s label, description, or hype, determine whether that product is a security under the securities laws.”

similar story

Kwon is not the only person embroiled in controversy. Changpeng Zhao, former CEO of Binance, the world’s largest cryptocurrency exchange, was sentenced to four months in prison in April.

Zhao was also forced to give up assets totaling $4.3 billion after being found guilty of money laundering.

Additionally, FTX CEO Sam Bankman-Fried was sentenced to 25 years in prison in March on fraud and conspiracy charges, and a judge ordered $11 billion in assets seized.

These legal actions highlight the ongoing regulatory scrutiny and consequences within the cryptocurrency industry.

Sharing his thoughts on the same, Gensler put it best when he asserted:

“Their fraudulent actions serve as a reminder that investors are harmed when companies do not follow the law. Terraform and Kwon fought investigative efforts all the way to the Supreme Court over investigative subpoenas. Thankfully, with this settlement, victims of large-scale fraud will now receive some justice.”

Next: SEC Cryptocurrency Director David Hirsch Resigns, Community Reacts

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