Fugitive Stable Coin Founder Do Kwon Accused of Securities Fraud in U.S.

SEC alleges cryptocurrencies developer and Terraform Labs defrauded buyers of TerraUSD, Luna

The founder of failed cryptocurrencies TerraUSD and Luna and his company misled U.S. investors who purchased billions of dollars of the digital assets, the Securities and Exchange Commission said Thursday.

The SEC filed a civil fraud lawsuit against Do Kwon and Singapore-based Terraform Labs Pte. Ltd. in Manhattan federal court, accusing them of misrepresenting the risk of TerraUSD and misleading investors about how Luna was used in South Korea.

Prosecutors in South Korea have obtained an arrest warrant for Mr. Kwon and a so-called red notice for him from global law-enforcement agency Interpol, effectively putting police agencies worldwide on the lookout for him.

Mr. Kwon is the developer behind the two cryptocurrencies that crashed last year, wiping out the savings of investors who put their money there. Mr. Kwon appears to be in hiding.

The SEC said in its court complaint that Mr. Kwon’s and Terrarform’s scheme led to the loss of at least $40 billion in market value. The market capitalization of the Luna token in April 2022 was among the 10 biggest in the world for crypto assets, the SEC said.

The SEC said Terraform and Mr. Kwon repeatedly misled the investing public that a Korean electronic mobile-payment application, Chai, used the Terraform software to process and settle transactions.

Chai payments never used Terraform’s blockchain to settle payments, the SEC said. Instead, Mr. Kwon and Terraform “deceptively replicated” Chai transactions onto their blockchain, to make it appear as if their software had a real-world use, the SEC alleged.