Jamie McNeill
The SEC has announced that they are to be charging Do Kwon and Terraform Labs over the issuance of the TerraUSD “stablecoin”, which was one of the most notorious implosions in the bear market in 2022.
There were many high-profile implosions in 2022, but the stablecoin backed by nothing but hot air was one of the most remarkable collapses of them all, since the fundamentals of the concept meant that as soon as confidence was lost in Kwon’s ability to back the stablecoin, it entered a death spiral in which the price fell by almost 100% within a matter of days.
This was one of the most significant implosions of the entire bear market, since the collapse of UST (which many, such as Raoul Pal, had been relying on for “risk-free yield”) sparked a domino effect that began a chain of toppling many large industry titans, whether they had exposure to the stablecoin directly or not.
SEC reference the Howey Test in their lawsuit
Whilst some have claimed that Do Kwon’s handling of the debacle amounts to negligence, incompetence and hubris rather than malevolence (and therefore he ought not be treated nearly as badly as characters like Alex Mashinsky or Sam Bankman-Fried),
whew lad, lots to digest in the SEC lawsuit vs Do Kwon and Terraform Labs
right off the bat, a very interesting fact is that the SEC is being more thorough than usual–specifically running through the Howey test for various assets (UST, LUNA, and wLUNA) and also alleging that… https://t.co/1JsBQijMnw pic.twitter.com/qHuL6mKpeo
— _gabrielShapir0 (@lex_node) February 16, 2023
The significance of claiming that UST and LUNA constitute securities in their lawsuit is that Do Kwon may now also face penalties for issuing unregistered securities, which comes with a substantial fine in the US.
This news comes as the US seeks to clamp down on a series of different unregistered securities, with the SEC hoping to provide more clarity for investors with regard to appropriate regulations. There will doubtless be many more altcoins that find themselves in the SEC’s crosshairs in the coming months.
Relevant news:
- Terra Luna Classic (LUNC) and Terra Luna (LUNA) Price Predictions as Bulls Trapped on Do Kwon’s Legal Battle News
- Do Kwon Admits Terra Design Failures His Fault – So Why Didn’t He Warn Investors?
- Do Kwon Stash of $39m in Crypto is Frozen by Korean Authorities – Terra Boss Claims it is Not His
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This article was written for Business 2 Community by Jamie McNeill.
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