SEC Reportedly Looking into UST ‘Federal Violations’ of ‘Investor Protection Regulations’

Tim Alper
Last updated: | 3 min read
Source: AdobeStock / qingwa


American regulators have waded into the aftermath of the terraUSD (UST) crash last month – and the coin’s operators could face trouble at the hands of United States courts and the Securities and Exchange Commission (SEC).

South Korean lawmakers and financial regulators have already begun investigations into Do Kwon, his associates, and his firm Terraform Labs. Some three or more civil legal cases involving hundred of South Korean LUNAC investors are also active or in the pipelines.

Media outlets have also asked questions about Terraform partner companies, while the South Korean government’s probe has also extended to partners. But now the SEC wants answers, too.

Bloomberg quoted “a person familiar with the matter” as stating that the SEC was now looking into the question of whether UST marketing “violated federal investor protection regulations.”

The source added that SEC’s enforcement attorneys were “looking into whether” Terraform had broken rules for securities and investment products – although the SEC refused to comment on the matter.

Terraform Labs was quoted as stating that it “wasn’t aware of an SEC investigation into UST,” while Kwon was quoted as stating:

“We are not aware of any SEC probes into terraUSD at this time. we’ve received no such communication from the SEC and are aware of no new investigation outside of that involving Mirror Protocol.”

But the same Mirror Protocol – a mechanism that allows users to track the price of American stocks using crypto – is already under the SEC scrutiny.

And in a June 8 Court of Appeals ruling, which was reported by the SEC, judges announced that an SEC subpoena – which Kwon and Terraform had previously disputed – had been properly served. Kwon had attempted to fight the move, claiming that the SEC had acted improperly when it had served him with the subpeona at a conference held in New York in September last year. The new ruling will allow the SEC to probe Terraform and Kwon.

Kwon had also claimed, along with Terraform, that American district courts “lacked personal jurisdiction because Kwon and Terraform had insufficient contacts with the United States.”

But, the SEC noted:

“The appellate court further rejected Terraform’s and Kwon’s jurisdictional arguments, noting the district court’s jurisdiction over Terraform and Kwon arose from their ‘purposeful and extensive U.S. contacts,’ such as promoting to U.S. investors, employing U.S.-based personnel, and contracting with U.S.-based entities.”

Meanwhile, Kwon – who has been relatively quiet on social media in recent times – has taken to Twitter to warn his followers about the preponderance of “falsehood” and “misinformation” surrounding his company and its associated tokens.

He defiantly claimed that Terraform would “soon be more proactive in communicating with the press and getting the right information out there.”

He also warned that some of the “experts” offering media outlets their opinion on Terra ecosystem flaws could not be trusted.

He wrote:

“There have been many hearsay reports about ‘core developers’ offering expert interviews about Terra’s mechanisms. Open source development is transparent, and I would urge [the] media to check if a single line of code by your ‘experts’ has ever made it into production.”


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