• The SEC has charged Terraform Labs and its co-founder Do Kwon with multi-billion dollar crypto asset securities fraud.
• Mirror, the decentralized platform built on Terra, allowed users to trade mirror assets of actual securities.
• Anchor, Terraform’s flagship product, touted a clean and straightforward UI and a consistent 20% interest rate on UST stablecoin.
Terraform Labs Charged With Crypto Fraud
The Securities and Exchange Commission (SEC) has charged Terraform Labs and its co-founder Do Kwon with orchestrating a multi-billion dollar crypto asset securities fraud through their algorithmic UST stablecoin and surrounding securities.
Mirror: Trading Mirrored Assets of Actual Securities
Mirror was the decentralized platform that was built on Terra which allowed users to trade mirrored assets of actual securities. At one point in the early days of Mirror, some users were ‘looping’ assets with leverage based on existing securities traded on federal exchanges. The press release calls out Mirror’s MIR token, the UST stablecoin, and Luna’s native LUNA token directly.
Anchor: Bread & Butter Of Ecosystem
Anchor was the bread and butter of the ecosystem that touts a clean and straightforward UI as well as a consistent 20% interest rate on UST stablecoin at its peak – when it was home to several billions of dollars in liquidity. The SEC complaint alleges that Kwon and Terraform Labs “misled and deceived investors” around topics such as the stability of UST.
Gensler Cracking Down On Crypto Frauds
Former CFTC chairman Gary Gensler is now leading up SEC’s enforcement team against any sort of crypto frauds or scams in order to protect investors from any potential harm or manipulation in this space.
The downfall of Terra brought upon much scrutiny by regulators – especially due to its size – but also due to its use case being so widely adopted amongst defi users prior to its collapse in 2022. It remains unknown whether Kwon will be able to make an argument for his innocence, but regardless, this is yet another reminder for traders that these markets are still subject to regulatory oversight even if they are decentralized or operate within blockchain technology networks