According to the Securities and Exchange Commission (SEC), Terra co-founder Do Kwon and the company he formed transferred over 10,000 bitcoin out of the failed venture and converted a portion of the coins into cash via a Swiss bank.
The allegations are made in an SEC lawsuit in which Kwon and Terraform Labs Pte are accused of defrauding investors by destroying the digital currencies he invented. According to the SEC, the scam resulted in losses of at least $40 billion.
According to the accusation, Kwon and Terraform stored more than 10,000 bitcoins in a so-called “cold wallet” that is not connected to any exchange for digital assets.
Since May of last year, they have periodically transferred bitcoin from the wallet, moving the assets to a bank in Switzerland and exchanging the tokens for cash, according to the SEC. It didn’t name the financial institution.
“About $100 million in fiat money has been withdrawn from that Swiss bank between June 2022 and the date of this complaint,” the agency claimed on Thursday.
With the help of a sister token called Luna and a combination of algorithms and trading incentives, Kwon created the TerraUSD stablecoin, which was intended to have a fixed $1 value. The structure collapsed in May 2022, aggravating a $2 trillion crypto market crash and causing several digital asset companies to fail.
As South Korea issued a warrant for his arrest on grounds including alleged violations of capital-markets law, Kwon’s whereabouts became unknown. According to the Asian country, Kwon is also the focus of an Interpol red notice.
The SEC claimed in federal court on Thursday that Terraform Labs and Kwon engaged in a plan to destroy at least $40 billion in market value by offering and selling unregistered securities, including the UST stablecoin.
The case represents a substantial uptick in the SEC’s campaign against the cryptocurrency sector.
The government also charged the firm and Kwon with deceiving investors by misrepresenting the stablecoin’s stability and its connection to the well-known South Korean mobile payment app “Chai,” which was advertised as keeping a 1-to-1 peg to the US dollar.
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