Local authorities in Singapore announced they had begun a probe connected to Do Kwon’s Terraform Labs.
According to a Bloomberg report, Singaporean police sent an email on March 6, which said, “investigations have commenced in relation to Terraform Labs.” The email also added that the inquiries are “ongoing,” and Do Kwon is not currently in the city-state.
Last month, on Feb. 16, the United States Securities and Exchange Commission (SEC) accused Kwon and Terraform Labs of fraud in a new lawsuit.
Some voices in the crypto space have criticized the lawsuit as a way for the SEC to go after stablecoins with future lawsuits. Lawyers in the industry have even called the SEC’s comparisons of assets “wild."
Meanwhile, the SEC probe uncovered that Kwon removed around 10,000 Bitcoin from the Terra platform and the Luna Foundation Guard, which he eventually converted to fiat. In total, the SEC alleges Kwon has laundered over $100 million worth of Bitcoin since the initial collapse of the platform.
At the time of writing, Kwon has made no comment. The Terraform Labs co-founder has been active on social media throughout the scandal. However, he has not tweeted since the beginning of February.
This entire saga has its roots back in May 2022 when the Terra USD (UST) stablecoin lost its peg to the U.S. dollar. The subsequent collapse of the Terra ecosystem caused a major implosion in the digital asset market, with losses of nearly $40 billion.
Terraform Labs has also been investigated by authorities in South Korea, where a warrant was issued for Kwon’s arrest. South Korean police traveled to Serbia in their efforts to locate Kwon.
On Feb. 15, South Korean prosecutors requested a warrant to arrest a local e-commerce executive who they accused of accepting Terra (LUNA) for promoting Terra Labs.
The Biden Administration is “aware of the situation” at Silvergate and will continue to monitor reports on the troubled bank as it unfolds, according to a White House spokesperson.
Speaking at a press briefing on March 6, Press Secretary Karine Jean-Pierre said the White House hasnoted that Silvergate marked another major crypto firm to “experience significant issues” in recent months but declined to go into further specifics on the firm.
“In recent weeks, banking regulators have released guidelines on how banks should protect themselves from risks associated with crypto,” she said, adding that:
“This is a president that has repeatedly called on Congress to take action to protect everyday Americans from the risk posed by digital assets and he will continue to do so. We won’t speak to this particular company as we have not with other cryptocurrency companies, but we will continue to monitor the reports.”
Silvergate, known as a “crypto bank,” was a key banking partner to a number of major crypto companies and projects.
However, uncertainty over the bank’s solvency began to spread at the start of March, after Silvergate delayed the filing of its annual 10-K report by two weeks. A 10-K report is a legally required document that provides a comprehensive overview of a company’s business and financial condition.
On the back of that news, Coinbase announced on March 2 that it had terminated its partnership with Silvergate, as the crypto exchange also alluded to concerns over the Department of Justice’s investigation into the firm over involvement in the collapse of FTX.
Several crypto heavyweights promptly followed suit by either cutting ties or distancing themselves from the bank, including Circle, Paxos, Bitstamp, Galaxy, MicroStrategy and Tether to name a few.
On March 4, Silvergate also announced that it was shutting down its digital asset payment network Silvergate Exchange Network due to “risk-based” concerns, sparking further uncertainty over the firm’s financials.
As a result, Silvergate’s stock price (SI) has plummeted roughly 60% since March 1, while the total combined market cap of crypto has dropped around 5.5% to $1.072 trillion in that same time frame.
Speaking with CNBC on March. 6, economist Noelle Acheson, the author of the Crypto is Macro Now newsletter, suggested that if Silverbank were to file for bankruptcy, it would give regulators a far greater excuse to clamp down on crypto than before, given the bank’s ties to traditional finance.
“Up until now we’ve been able to say that the fallout of everything that happened last year was contained within the crypto industry — painful, but contained,” Acheson said, adding that:
“If Silvergate goes under then the regulators will be able to say ‘aha, systemic risk, we told you so.’ That will give them even more ammunition to go after crypto and increase their choke on fiat access for crypto businesses.”
The United States Securities and Exchange Commission has targeted an investment adviser and individual allegedly connected to a $100-million cryptocurrency fraud in its latest enforcement action.
According to a March 6 announcement, the SEC filed an emergency action on Feb. 23 against investment adviser BKCoin and one of the principals, Kevin Kang, alleging the two “disregarded the structure of the funds, commingled investor assets, and used more than $3.6 million to make Ponzi-like payments to fund investors.” The financial regulator’s complaint alleged that BKCoin raised roughly $100 million from investors to invest in crypto, but Kang diverted some of the funds for personal use — including vacations, tickets to sporting events tickets and an apartment.
“As we allege, investors entrusted their money to the defendants to trade in crypto assets,” said Eric Bustillo, director of the SEC’s Miami Regional Office. “Instead, the defendants misappropriated their money, created false documents, and even engaged in Ponzi-like conduct. This action highlights our continued commitment to protecting investors and uprooting fraud in all securities sectors, including the crypto asset arena.”
The SEC complaint was the latest enforcement action targeting a firm or individuals involved in crypto, alleging violations of the antifraud provisions of the federal securities laws. According to the regulator, the SEC intended to seek disgorgement, prejudgement interest, and a civil penalty against BKCoin and Kang as well as a permanent injunction against both parties.
Many in the space have criticized chair Gary Gensler, who leads the SEC as the agency moves forward on a series of anti-crypto actions, for labeling some crypto assets as securities through enforcement rather than the court system. The Wall Street Journal reported on March 5 that crypto exchange Binance attempted to hire Gensler as an adviser in 2018 and 2019 before his appointment as SEC chair.
This Daily Dose was brought to you by Cointelegraph.