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Breaking: Terra, Do Kwon Under SEC Investigation, But There’s A Catch

Terra founder Do Kwon and Terraform Labs (TFL) were ordered by a court to comply with a Securities and Exchange Commission (SEC) probe. 
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Breaking: Terra, Do Kwon Under SEC Investigation, But There’s A Catch

Terra founder Do Kwon and Terraform Labs (TFL) were ordered by a court on Wednesday to comply with a Securities and Exchange Commission (SEC) probe.

But the probe is not in relation to the blockchain’s recent meltdown. Rather, like a recent probe against Binance, and a long running case against Ripple, the SEC is investigating whether Terra’s tokens are illegal securities.

While Terra’s crash, which cost investors over $30 billion, has attracted ire from the SEC, so far, the watchdog has not initiated any action over the matter.

But South Korean authorities are investigating allegations of embezzlement by TFL. The country is also planning to toughen crypto laws in wake of the Terra crash.

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SEC investigating Terra over illegal token sales

According to a report by legal news publication Law360, the SEC investigation dates back to September 2021, when the watchdog served Kwon and TFL with subopenas.

This week, a court ruled that Kwon cannot dodge the investigation on the grounds that TFL is a South Korean entity, given that it has customers in the United States.

The court also dismissed Kwon’s allegations that the SEC was not authorized to serve him with a subopena.

The SEC is specifically probing Terra’s Mirror Protocol, which allowed trading in tokens tied directly to the price of real world stocks. A series of exploits last month have rendered Mirror unusable, after $92 million was drained from the program.

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Kwon, TFL face growing scrutiny after LUNA, UST collapse

Kwon and TFL have been subject to severe scrutiny after the Terra collapse, with multiple reports suggesting that holders are planning legal action against the two.

With more allegations of fraud and mismanagement being levelled against Terra, the blockchain’s recent relaunch has largely flopped.

Prices of the relaunched LUNA token are in freefall, plummeting over 80% since an airdrop in late-May. The token has lost 22% in the past 24 hours, and is trading at $2.83.

 

 

 

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Ambar Warrick

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn't trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns. You can reach him at ambar@coingape.com

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Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
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