U.S. SEC initiates investigations into Terra, claims of Do Kwon laundering $80M every month emerge

  • Sources familiar with the matter said that the U.S. SEC will investigate Terra for potential security law violations.
  • Some sources also said that the SEC has found that $80 million worth of Terra’s funds moved to different wallets just before the collapse.

Terraform Labs seems under deep waters as the U.S. Securities and Exchange Commission (SEC) has launched a fresh investigation into the collapse of the Terra ecosystem. A Bloomberg report shows that the SEC will investigate whether Terra violated investor protection regulations.

The implosion of the TerraUSD (UST) stablecoin last month has been a major wake-up call for regulators worldwide. The top U.S. authorities have spoken over the last few weeks about investigating the matter and bringing stricter rules for stablecoin use.

Sources familiar with the matter said that the SEC could put further pressure on Terra and its founder Do Kwon. Besides, Do Kwon has been already facing scrutiny by the SEC for his work on the Mirror Protocol. On Wednesday, June 8, the Second Circuit said that Terra and Do Kwon will have to comply with the subpoenas offered. However, Terraform Labs said that it wasn’t aware of any such investigation. In a statement to Bloomberg, Terra founder Do Kwon said:

We are not aware of any SEC probes into TerraUSD at this time – we’ve received no such communication from the SEC and are aware of no new investigation outside of that involving Mirror Protocol.

Major allegations on Do Kwon by employees

Since the collapse of the Terra ecosystem, Terraform Labs has been facing major investigation by the South Korean authorities. These authorities have also interviewed several employees on the matter. Some of the employees have revealed stark details regarding the company’s operations and Do Kwon, before the collapse.

The allegations note that Terraform Labs embezzled Bitcoins, primarily stored to protect the UST’s dollar peg. Local news publication Naver says that the U.S. SEC has caught Terra founder Do Kwon off-guard in an alleged situation involving money laundering.

Follow us for the latest crypto news!

On Thursday, another South Korean publication JTBC reported: “The US Securities and Exchange Commission recently conducted a remote video survey of some of Terra’s key designers and focused on inquiring about Terra’s poor design structure.”

As per sources, the U.S. SEC has discovered a situation wherein $80 million worth of the company’s funds moved to different wallets, for operating expenses. This reportedly happened a few months before the collapse of Terra. Thus, it now raises suspicion of money laundering on Terra founder Do Kwon. But one of Terra’s internal designers also said that CEO Do Kwon hasn’t officially received any payment from the company.

Also, Terra’s Anchor Designer said that the original interest rate for the Anchor Program was designed to be kept low at 3.6 percent. However, Do Kwon refused to accept the proposal and raised the interest rate to 20 percent a week before the release.

Related: Following Terra’s collapse, China authorities enforce greater regulation on digital assets

About Author

Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fictions novels and sometimes explores his culinary skills.

Comments are closed.