The U.S. Securities and Exchange Commission (SEC) has charged Singapore-based Terraform Labs and its chief Kwon Do-hyung with defrauding investors through a multi-billion dollar crypto asset securities fraud.

The SEC alleges that Kwon and Terraform Labs failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, including Terra USD and LUNA.

The agency claims Kwon and Terraform raised billions through unauthorized offerings and selling of crypto asset securities, including mAssets and the TerraUSD algorithmic stablecoin.

The SEC further alleges that Terraform and Kwon deceived investors by falsely claiming that a popular mobile payment application in South Korea used Terra blockchain, in order to add value to the LUNA cryptocurrency.

The SEC has filed a complaint in the Southern District of New York against Terraform and Kwon, accusing them of repeating false and misleading statements to build trust before causing devastating losses for investors.

According to the SEC, the Terraform ecosystem was neither decentralized nor finance; it was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.

The Terraform Labs chief, Do Kwon, is known to be residing in Serbia, and last week, Seoul prosecutors told Forkast that Serbian authorities have agreed to “actively cooperate” with the investigation and expatriation of Kwon.

Terraform Labs’ crypto project, which was once valued at US$40 billion, collapsed in May of last year following the depegging of the Terra stablecoin and the value of its sister Luna cryptocurrency plunged to zero from around US$120.

The SEC’s charges against Terraform and Kwon serve as a warning to investors to conduct due diligence before investing in any crypto asset securities.

As the crypto industry continues to evolve and attract more investors, it is crucial to ensure that the companies behind these assets are transparent and trustworthy.

The SEC’s actions in this case demonstrate its commitment to protecting investors and maintaining the integrity of the market.