The US Securities and Exchange Commission (SEC) is reportedly investigating the collapse of TerraForm Labs and the algorithmic stablecoin Terased (UST). “SEC enforcement attorneys are investigating whether TerraForm Labs broke securities and investment products regulations.”
The SEC has approved Terraform Labs and UST . started the investigation
The US SEC is investigating Terraform Labs and its algorithmic stablecoin Terased (UST), Bloomberg reported Thursday, citing people familiar with the matter.
The UST lost its peg against the US dollar in early May. The stablecoin quickly lost its value and collapsed along with the cryptocurrency Terra (LUNA). Both coins were created by Do Kwon, CEO of TerraForm Labs, which has since launched LUNA 2.0.
The SEC is investigating whether the marketing of UST prior to the crash violated federal investor protection rules, the publication reported. Specifically, SEC enforcement attorneys are investigating whether TerraForm Labs broke securities and investment products regulations.
The explosion of the two cryptocurrencies prompted lawmakers in different countries to regulate stablecoins. In the US, Treasury Secretary Janet Yellen said regulation of stablecoins is urgent. SEC Chairman Gary Gensler later said that too many crypto tokens would fail.
Kwon is already facing scrutiny from the SEC over the Mirror Protocol. In a ruling on Wednesday, Terraform Labs and CEO Kwon were ordered to comply with the SEC’s subpoena filed in February. The court rejected Kwon’s appeal.
With regard to the investigation by the SEC, Singapore-based Terraform Labs told the news outlet that it was not aware of the SEC investigation into the UST. “We are not aware of any SEC investigations into Terraced at this time – we have not received any such communication from the SEC and are not aware of any new investigations involving the Mirror Protocol,” Kwon said.
Legal experts do not expect Kwon to face criminal charges in the US, saying he is more likely to face civil charges and regulatory penalties.
In South Korea, where Kwon is located, the government has opened an investigation into the Terra and Terrasd collapses. A class-action lawsuit has also been filed against Terraform Labs, Kwon and another co-founder. In addition, Seoul Police is investigating whether employees of Terraform Labs embezzled the company’s bitcoins.
Terraform Labs used to have a subsidiary in South Korea. However, it was disbanded by Kwon a few days before the collapse of UST and Luna.
What do you think of the SEC investigating the collapse of UST? Let us know in the comments section below.
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