Cryptocurrency developer and owner of Terraform Labs, Do Kwon, has been charged with fraud after global investors lost about $42 billion in his company. The US Securities and Exchange Commission (SEC) filed a complaint in the Southern District of New York court alleging that Kwon is a fugitive running from the law.

SEC Charges Do Kwon with $42 Billion Fraud After Terraform Lab Collapses

In the federal court suit, the SEC said Kwon and his company scammed investors of billions of dollars, which he raised through several digital assets in April 2018.

The federal regulator said many of the securities were not registered, and when the cryptocurrency exchange crashed, several US crypto lenders including Celsius Network and Singapore-based cryptocurrency fund manager Three Arrows Capital crashed.

According to the SEC, Kwon was primarily responsible for building two cryptocurrencies which ultimately crashed the market. His algorithmic stablecoin, TerraUSD (USF) paired with Luna token to peg its value to the US dollar at 1:1. As at May 2022, TerraUSD was worth $18.5 billion and was the 10th-largest cryptocurrency in the world.

But trouble started on May 9 when the UST slipped below its 1:1 peg, causing the value of both TerraUSD and Luna to dip significantly. Blockchain analytics firm Elliptic said investors in USF and Luna lost about $42 billion in investment, and the situation roiled the market.

No one really knew where Kwon was living, and his address in the United States could not be verified. In September 2022, a court in South Korea alleged that he was living in Singapore and issued an arrest warrant for him; but the police in Singapore denied that he was in their country. It seems now that he is on the run from the governments of many countries – but some intelligence reveals he may be in Serbia.

According to the chairman of the SEC, Gary Gensler, “This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws, but it also demonstrates the strength and commitment of the SEC’s dedicated public servants.”