The United States Securities and Exchange Commission (SEC) filed a lawsuit on February 16 against Terraform Labs and its founder, Do Kwon, alleging that the parties have orchestrated “a multi-billion dollar crypto asset securities fraud.”

The charge claims that Kwon and Terraform offered & sold an “inter-connected suite of crypto asset securities, many in unregistered transactions,” mostly with regards to its stablecoin TerraClassicUSD (USTC) and Terra Luna Classic (LUNC).

SEC chairman Gary Gensler also allege that Kwon and Terraforms Labs “failed to provide the public with full, fair, and truthful disclosure,” particularly for USTC and LUNC, which caused “devastating losses for investors.”

In May of 2022, USTC lost its peg to the US Dollar which caused its price to collapse to near the zero mark, which resulted in a wider collapse of the cryptocurrency market which effectively slashed around $40 billion from the cryptocurrency market value.

Sources:

https://cointelegraph.com/news/sec-sues-do-kwon-and-terraform-labs-for-fraud

https://www.cnbc.com/2023/02/16/sec-charges-do-kwon-with-fraud-in-connection-with-terra-collapse.html

https://www.cnn.com/2023/02/16/investing/sec-charges-do-kwon/index.html