Do Kwon Cashes Out $80 Million Monthly: US SEC

The US SEC has accused Terraform Labs and CEO Do Kwon of deceiving investors and committing a multi-billion-dollar fraud.

Do Kwon US SEC

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  • The US SEC has accused Terraform Labs and CEO Do Kwon of deceiving investors and committing a multi-billion-dollar fraud involving cryptocurrency assets.
  • Kwon and Terraform Labs are accused of hiding information from investors and making false statements to gain trust, resulting in massive losses for investors.
  • The SEC’s complaint states that Kwon took $80 million per month from TerraUSD and LUNA for almost three years, and the Terra ecosystem was a fraud supported by an algorithmic stablecoin controlled by the defendants, not a computer code.

Nearly a year after the Terra mishap, the U.S. Securities and Exchange Commission (U.S. SEC) sued Terraform Labs and its co-founder and CEO Do Kwon for “orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.”

Allegations of Fraud and Misleading Statements

In May 2022, TerraUSD (UST) and sister coin Luna collapsed resulting in $60 billion worth of losses. (Read more: Newsletter: What happened to USDT, UST, and LUNA | May 12, 2022)

“We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD,” the SEC wrote in a press release.

SEC Chair Gary Gensler also noted that the Commission also alleged that the firm “committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”

Allegations of Fraud and Misleading Statements

According to the U.S. SEC, Do Kwon and his company schemed their users from April 2018 until the platform’s collapse. Allegedly, Kwon cashed out $80 million each month for nearly three years from TerraUSD and LUNA. He denied the allegation and said he also lost “most of what I had in the crash.” (Read more: Do Kwon Denies Cashing Out $2.7 Billion worth of LUNA before The Crash)

“Almost immediately upon UST’s recovery in May 2021, Terraform and Kwon began to make materially misleading statements about how UST’s peg to the dollar was restored. Specifically, Terraform and Kwon emphasized the purported effectiveness of the algorithm underlying UST in maintaining UST pegged to the dollar – misleadingly omitting the true cause of UST’s re-peg: the deliberate intervention by the U.S. Trading Firm to restore the peg,” the complaint added.

Allegations of Fraud and Misleading Statements

Moreover, they also tried to revitalize the Terra Blockchain by resetting the network ownership to 1B token. However, after reactivating Luna 2.0, its value immediately fell to $5.98, or down more than 70% after the blockchain Terra relaunched. (Read more: Luna V2 Price Pumps Then Dumps to $5 Immediately After Relaunch)

 “As alleged in our complaint, 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,” Director of the SEC’s Division of Enforcement Gurbir S. Grewal stated.

Red Notice Issued by Interpol for Terra’s Do Kwon

Last year, following the collapse of Terra, the US Congress drafted a bill to ban algorithmic stablecoins. The bill would make it temporarily illegal to issue or create new coins for 2 years. (Read more: US Solons Eye to Ban Algorithmic Stablecoins for 2 Years)

In September, Do Kwon was placed under a red notice by the Interpol, urging law enforcement agencies worldwide to find and arrest him. (Read more: Interpol Issues Red Notice for Terra’s Do Kwon)

Aside from that, Terraform Labs employees were also sanctioned last year by the Seoul Southern District Prosecutor’s Office with a travel ban to eliminate the possibility of key officials fleeing abroad. (Read more: Terra Employees Banned from Leaving South Korea)

FTX and Other Recent Crypto Cases

FTX and Sam Bankman-Fried

Aside from Do Kwon, the founder and former CEO of FTX Sam Bankman-Fried is also now being  charged for wire fraud and campaign finance violations. He was extradited back to the United States, and pleaded not guilty through his lawyer. His trial will be held in the Southern District of New York, and is set to begin in early October. (Read more: FTX Founder Pleads Not Guilty, Trial to Start in October)


Recently, the US SEC expressed that they might file a lawsuit against Paxos, blockchain and trust company, for issuing their stable coin Pax Dollar (USDP) and Binance USD (BUSD) tokens which are “violating investor protection laws.” (Read more: US SEC to Sue Crypto Trust Paxos Over Binance Stablecoin BUSD)


This month, the commission also settled with cryptocurrency exchange Kraken as it halts its staking program and agreed to pay $30 million in disgorgement, prejudgment interest and civil penalties; following SEC’s charge against the crypto exchange after it failed to register its offer and sale of “crypto asset staking-as-a-service program.” (Read more: Crypto Staking No More: Kraken Settles with US SEC Over Staking Program)

This article is published by BitPinas: Do Kwon Cashes Out $80 Million Monthly: US SEC

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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