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Scandal about Terra Luna - new dubious details & illegal securities issue?

 


There seems to be no end in sight. The scandal surrounding the crash of the cryptocurrency Luna (now listed as Luna Classic) and the supposed stablecoin UST is taking on more trains. A few hours ago, the Watcher Guru Twitter account released new details, if not earlier, allegations concerning Terra CEO Do Kwon.


The US Securities and Exchange Commission has reportedly revealed that $80 million (100 billion won) of the company's funds were transferred to various wallets each month to cover operating expenses. This reportedly happened a few months before the collapse of Terra. According to the reports, it was this particular activity that raised suspicions of money laundering against Do Kwon.


JTBC reported that the SEC received internal statements showing that “funds have flowed from crypto exchanges ( Top 10 Crypto Platforms Reviewed) .” A key insider said that Do Kwon has not received any official payment from the company.


The Securities and Exchange Commission (SEC) is investigating Kwon for violating securities laws, alleging that the blockchain company enabled the purchase of U.S. stocks with Terra, violating securities laws.


If the allegations prove true, Kwon could face legal action in the United States. For now, "Do Kwon is innocent until proven guilty in court."


Terra is under SEC scrutiny for illegal token sales

According to a Law360 report Wednesday, the SEC investigation dates back to September 2021, when the agency served subpoenas against Do Kwon and Terraform Labs while the CEO was attending a crypto conference in New York.


A court ruled this week that because Terraform Labs is a South Korea-registered company, Kwon cannot escape scrutiny because it also serves customers in the US. The court also dismissed Kwon's contention that the SEC did not have the right to issue a subpoena to him.


In particular, the securities regulator is investigating Terra’s DeFi project, Mirror Protocol. On Mirror, users could trade synthetic versions of real stocks and cryptocurrencies. 


Kwon in the crosshairs of justice

Do Kwon and the Terraform Labs have come under fire in recent weeks following Terra's historic collapse. Last month, authorities in South Korea estimated that over 275,000 people fell victim to the sudden collapse of the UST and LUNA. Some of these investors have already taken legal action against Kwon.


In addition, the Conservative Party of South Korea has summoned Kwon to a parliamentary hearing on the matter. Terraform Labs was embroiled in another controversy in late May when South Korean authorities subpoenaed all of the company's former employees to investigate possible internal price manipulation.


And today, the Financial Times revealed that the Seoul Metropolitan Police Agency is investigating allegations of embezzling an undisclosed amount of bitcoin from Terra's treasury. Terraform Labs co-founder Daniel Shin has denied the allegations of misconduct and fraud, claiming that there was "no intent to deceive" and that the company wanted to redesign the payment processing system using blockchain technology.


Most notably, Kwon's efforts to revive the ailing Terra ecosystem have been largely unsuccessful. The prices of both tokens associated with both the new and old Terra chains are still in the doldrums, as can be seen in the Luna Classic chart below.

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