There’s Nothing Stable about this Stablecoin, SEC Says
The US Securities and Exchange Commission is now investigating whether the Terra (UST) was marketed in a fraudulent way before it went to cause a market-wide crash and declined to pennies on the dollar.
A stablecoin in cryptocurrency is supposed to provide an option of safe investment, but Terra (UST) was backed by an algorithm, rather than a physical asset or a fiat currency such as the USD. The flaw in such a mechanism made a lot of investors buy Terra’s other native token, LUNA, in order to save the price of UST.
As both Terra (UST) and Terra (LUNA) went through a rapid downward spiral and ended up in a flatline, many questions were raised on the validity of the structure. Michael J. Hsu, the Acting Comptroller of the Currency at SEC has perceived this situation as a ‘wake-up call’.
According to the SEC enforcement lawyers, multiple counts of federal investor protection regulations might be violated. The breakdown of the algorithmic stablecoin started on May 7th, when the price of the supposed stablecoin UST started wobbling and declined to an eye watering 35 cents on May 9th. A few days later, UST crashed to the ground on May 31st, having a value of just $0.025. After Terra announced LUNA 2.0 and restarted the blockchain, the stablecoin was no longer included in the trading markets.
Furthermore, Terraform Labs and its CEO Do Kwon are already facing the music with SEC for an earlier subpoena, a litigation case back from November 12, 2021 related to a system company called Mirror Protocol. The charges include, but are not limited to:
$80 Million Clean Up Right Before Terra’s Demise
According to JTBC News, the SEC is also looking into money laundering allegations. Apparently, around 100 billion won left Terraform Labs accounts monthly as operating expenses. That sums up to about $80 million being laundered in a month just before Luna’s collapse. According to the SEC, there were internal statements documenting the money being sent ‘into dozens of cryptocurrency wallets’.
The renewed version of Terra’s blockchain, LUNA 2.0 went live on the markets just a few weeks ago, but it already seems that investors are wiping the floor with Do Kwon’s Terra Luna Classic (LUNC) and Terra (LUNA).
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Source: Cryptocurrency - investing.com
