Tag: terraform labs

US SEC Agrees to Delay Terraform Labs’ $40-Billion Crypto Fraud Trail for Do Kwon’s Extradition

The US Securities and Exchange Commission agreed to delay a civil trial against Terraform Labs and co-founder Do Kwon for allegedly orchestrating a $40 billion (roughly Rs. 3,32,329 crore) cryptocurrency fraud, so that Kwon can be extradited and attend.

In a Monday filing in Manhattan federal court, the SEC said a “modest” adjournment of the January 29 trial was justified, based on statements from Kwon’s lawyer that Kwon wanted to attend, agreed to extradition from Montenegro, and could be in the United States by mid-March.

It also opposed separate trials for Terraform and Kwon, saying the cases were virtually the same, and that two trials would unnecessarily require whistleblowers and ordinary retail investors to testify twice.

US District Judge Jed Rakoff will decide whether to move the trial date. The SEC asked for April 15, to accommodate scheduling conflicts.

Kwon’s lawyer sought a delay until at least March 18, and on Monday said he would not seek further adjournments even if Kwon were unable to attend on the new date.

The case stems from the collapse of TerraUSD, a “stablecoin” designed to maintain a constant $1 price, and Luna, a more traditional token closely linked to TerraUSD.

Both cryptocurrencies lost an estimated $40 billion or more when TerraUSD in May 2022 proved unable to maintain its $1 peg.

The SEC said Terraform and Kwon deceived investors about the stability of TerraUSD, and how a popular Korean mobile payment app used the Terraform blockchain to settle transactions.

Last month, Rakoff ruled that Terraform and Kwon violated US law by failing to register TerraUSD and Luna.

Kwon also faces related US criminal charges, and an extradition request from his native South Korea. He was arrested in Montenegro last March.

The case is SEC v Terraform Labs Pte Ltd et al, US District Court, Southern District of New York, No. 23-01346.

© Thomson Reuters 2024

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TerraUSD Founder Do Kwon Indicted in US Following Montenegro Arrest

Do Kwon, the cryptocurrency entrepreneur behind two digital currencies that lost an estimated $40 billion (nearly Rs. 3,28,500 crore) or more last year, has been charged with fraud by US prosecutors.

An eight-count indictment against Kwon was made public in the US District Court in Manhattan, several hours after news of his arrest earlier Thursday in Montenegro.

Lawyers for Kwon in the United States did not immediately respond to requests for comment after business hours.

Thursday’s indictment charges Kwon, a South Korean national who co-founded Terraform Labs and developed the TerraUSD and Luna currencies, with two counts each of securities fraud, wire fraud, commodities fraud and conspiracy.

The criminal case follows related US Securities and Exchange Commission civil charges against Kwon and Terraform last month.

Kwon had been a fugitive for several months, and South Korean authorities issued an arrest warrant for him last September.

South Korean police said on Friday that the identity of the suspect arrested in Montenegro had been confirmed as Kwon after his fingerprints matched the information held by the country’s National Police Agency (KNPA).

“This has been shared with the Seoul Southern District Prosecutors’ Office and Interpol in Montenegro,” one official at the KNPA said.

Prosecutors will work with other institutions to carry out a swift repatriation, a spokesperson for the country’s prosecution service said.

Montenegro’s interior ministry said police detained a person thought to be Kwon and a second suspect, who were trying to board a flight to Dubai at Podgorica airport.

Police found forged passports of Costa Rica and Belgium during the encounter, the ministry said.

“The person is suspected of being one of the most wanted fugitives, South Korean national Do Kwon, a co-founder and CEO of the Singapore-based Terraform Labs,” Interior Minister Filip Adzic wrote on Twitter.

“The former cryptocurrency king who is behind losses of over $40 billion, has been apprehended at the Podgorica airport with forged documents,” Adzic added.

TerraUSD was a so-called “stablecoin” designed to maintain a constant $1 price, while Luna’s value fluctuated.

But authorities have said TerraUSD and Luna were paired, such that a decline in one could take down the other.

They also said Kwon misrepresented the stability of TerraUSD, once among the top 10 cryptocurrencies by market value.

Both currencies crashed last May, with TerraUSD’s price sinking to less than one penny.

In its civil case, the SEC accused Kwon and Terraform of “orchestrating a multi-billion dollar crypto asset securities fraud.

“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors,” SEC Chair Gary Gensler said in a statement at the time.

© Thomson Reuters 2023

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South Korea Police Wants Country’s Crypto Exchanges to Freeze Luna Foundation Guard’s Assets

South Korean police authorities have taken measures to freeze assets of the Luna Foundation Guard (LFG) following the Terra UST stablecoin bust at the beginning of May. As per a report by a local news publication, the Seoul Metropolitan Police Agency has asked multiple exchanges to block Luna Foundation Guard from withdrawing any corporate funds. The report adds that authorities have put in the request on suspicion of misappropriation of corporate funds. That said, the exchanges are not bound by law to do so, meaning that whether or not those actions will be carried out is unclear.

Per a report published by the South Korean national broadcaster KBS, the Seoul Metropolitan Police Agency’s Cybercrime Investigation unit has asked several local exchanges to withhold funds held in wallets used by the Terra-affiliated non-profit organisation.

The move comes hot on the heels of Terra suffering the greatest crash in crypto history when its UST stablecoin lost its peg to the dollar, sending its volatile token LUNA into a death spiral and erasing about $40 billion (roughly Rs. 3,10,380 crore) of value in a week.

LFG, the non-profit established to ensure UST’s stability, made efforts to save UST by selling its Bitcoin holdings as the meltdown took hold, but it wasn’t enough to stop UST from crashing. LFG has since claimed that it spent more than 80,000 Bitcoin worth $2.4 billion (roughly Rs. 18,622 crore) to defend the UST peg, leaving only 313 Bitcoin remaining, in addition to its holdings in UST, AVAX, and a few other digital assets.

Since Terra’s UST de-pegging event and LUNA’s collapse, Terra’s founder Do Kwon has been a subject of scrutiny too. Last week, reports emerged that he had been ordered to pay $78 million (roughly Rs. 604 crore) for tax evasion in South Korea, an allegation he later denied, claiming that Terra has no outstanding tax liabilities in the country.

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