US financial regulators have accused failed South Korean cryptocurrency chief Do Kwon and his firm Terraform Labs of “organizing a multi-billion dollar crypto asset securities scam.”
The Singapore-based company created the tokens Terra Luna and TerraUSD, which have seen spectacular falls over the past year.
The collapse is estimated to have cost investors more than $40 billion (£33.5 billion).
Mr Kwon and Terraform Labs did not immediately respond to a BBC request for comment.
“We allege that Terraform and Do Kwon have failed to provide the public with the full, fair and truthful disclosure required of a variety of crypto-asset securities, most notably LUNA and Terra USD,” said Gary, Chairman the US Securities and Exchange Commission (SEC). Gensler said in a statement.
“We also allege that they committed fraud by repeating false and misleading statements to build trust before inflicting devastating losses on investors,” he added.
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According to the SEC, Mr. Kwon and his company raised billions of dollars from investors by selling them “an interconnected suite of crypto-asset securities,” with many transactions unrecorded.
The SEC also alleged that Mr. Kwon and Terraform repeatedly claimed that the tokens would appreciate in value and misled investors about TerraUSD’s stability.
However, the value of the token and the associated Luna cryptocurrency crashed to near zero in May last year.
Investors in TerraUSD and Luna have lost an estimated $42 billion globally, according to blockchain analytics firm Elliptic.
It triggered a sell-off in major cryptocurrencies like Bitcoin, Ethereum, and Tether. As a result, the term crypto crash has been trending online.
“I am heartbroken by the pain my invention has caused you all,” Mr. Kwon said at the time.
The SEC complaint, which included other allegations, did not specify Mr. Kwon’s whereabouts.
In December, South Korean authorities, who issued an arrest warrant for Mr. Kwon, said they believed he was in Serbia.
Mr Kwon previously denied he was in hiding but did not reveal his whereabouts.
“For any government agency that has shown an interest in communicating, we cooperate fully and have nothing to hide,” he said. he said on Twitter.
Mr. Kwon faces charges of fraud and capital markets violations in his home country of South Korea.
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