Jesse Coghlan
The United States Securities and Exchange Commission has filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”
In a Feb. 16 statement, the SEC said that Kwon and Terraform offered and sold an “inter-connected suite of crypto asset securities, many in unregistered transactions.” The agency pointed to Terraform Labs’ now-collapsed algorithmic stablecoin, TerraClassicUSD (USTC), and its connected cryptocurrency, Terra Luna Classic (LUNC).
Today we charged Singapore-based Terraform Labs PTE Ltd and Do Hyeong Kwon with orchestrating a multi-billion-dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities. — U.S. Securities and Exchange Commission (@SECGov) February 16, 2023
The SEC also took issue with mAssets, crypto derivatives that mirror the stock price of publicly listed companies, and Terraform’s issuance of Mirror (MIR), a governance token for the Mirror protocol that lists mAssets.
SEC chair Gary Gensler said in a statement that Kwon and Terraform “failed to provide the public with full, fair, and truthful disclosure,” particularly for USTC and LUNC, which were formerly named Terra (LUNA) and TerraUSD (UST). Gensler added:
“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
The SEC filed a 55-page complaint in the U.S. District Court for the Southern District of New York with charges relating to violations of the registration and anti-fraud provisions of the Securities Act and the Exchange Act.
In the complaint, the SEC said that Terraform and Kwon “touted and marketed” its Anchor Protocol, which at one point was advertised to pay out 20% interest on USTC deposits. It also alleged Terraform and Kwon misled investors about the stability of Terra’s stablecoin.
Last May, USTC lost its peg to the U.S. dollar, causing its price — and the price of LUNC — to effectively collapse to zero. This resulted in a wider collapse in the digital asset market that wiped out an estimated value of $40 billion.
Gensler commended the SEC’s staff on their investigation, adding: “The defendants attempted to prevent us from obtaining important information about their business.”
“This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws,” he added.
Kwon, a South-Korean national, is currently at large and believed to be in Serbia after leaving his residence in Singapore sometime in September following a Seoul court issuing an arrest warrant for him. Interpol reportedly issued a Red Notice for Kwon to law enforcement worldwide later in September.
Kwon has denied he's hiding from authorities and Terraform have claimed South Korea’s case against Kwon is “highly politicized.”
Cointelegraph contacted Terraform Labs for comment but did not receive an immediate response. Do Kwon could not be reached for comment.
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David Attlee
Japan, a nation where foreign stablecoins like USDT are prohibited, plans to begin its central bank digital currency (CBDC) pilot in April 2023. It will aim to include private businesses and test an ecosystem.
On Feb. 17 the Bank of Japan (BoJ) released the opening speech of its executive director Shinichi Uchida at the CBDC committee meeting. In it, Uchida announces that the Bank decided to launch a pilot program for “digital yen” in April, after finishing its Proof of Concept testing, that has begun in 2021.
The pilot test will continue the work on the technical feasibility of “digital yen” and extend the experiment to the modeling of a CBDC ecosystem with the participation of private companies. As the official specifies, no actual retail transactions will be made during the pilot, only the simulated ones.
Uchida’s speech focuses on the design of the future CBDC and the need to consult with the private sector on alternative data models, architectures for offline payments and other vital elements of the system. For this kind of consultation, the CBDC forum will be created.
The news about the CBDC pilot was highly anticipated, as the local media reported about the BoJ’s intention back in November 2022. From these reports, it is known that at least three Japanese megabanks and regional banks will collaborate with the BoJ.
Meanwhile, Japanese authorities also consider lifting the ban on foreign stablecoins, which came into law in 2022. According to the Financial Services Agency (FSA) of Japan, the amendments should be passed by June 2023. While they won’t let any foreign stablecoin into the market automatically, the green light will be shown to those coins, which successfully passed individual checks.
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Helen Partz
Developers of one of the earliest Android-based mobile browsers are working to bring online communication to the next level by introducing it to Web3.
Sending Labs, a new startup focused on decentralized communications protocols, has secured $12.5M in seed funding to launch the Web3 communications stack.
The new platform takes on the mission of building accessible and secure Web3 communication infrastructure for developers and the community, applying end-to-end decentralization of the core of its products. With the new offering, Sending Labs aims to enable privacy-preserving communications and guarantee digital assets ownership and transfer within community chats.
The seed funding featured lead investors like Insignia Venture Partners, MindWorks Capital and Signum Capital, as well as other participants like K3 Ventures and Lingfeng Innovation Fund.
Announcing the seed raise on Feb. 16, Sending Labs also launched its first two messaging products, including SendingNetwork and SendingMe.
Now launched in beta, the products aim to assist developers in building decentralized social applications and helping the community access an encrypted decentralized group chat platform. The tools allow users to monetize their projects using smart contract payments and trading protocols through a wide variety of methods like peer-to-peer swaps, community marketplaces, crowdfunding, airdrops, gifting, auctioning and others.
“Twitter officially banning third-party clients, while millions of FTX users are cut off from withdrawing assets, has thrust decentralization and digital asset ownership back into the spotlight,” Sending Labs said in the announcement. Sending Labs co-founder and CEO Joe Yu stressed that Web3 and decentralized group messaging are the first steps to returning data ownership back to the user.
Sending Lab’s founders, Yu and Mason Yang, previously co-founded MoboTap, a company that developed Dolphin, one of the earliest Android-based mobile browsers. The browser was named one of the best iPhone and iPad apps of 2011, reaching a community of 200 million users across the United States, Europe and Japan.
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This Daily Dose was brought to you by Cointelegraph.
