The Securities and Exchange Commission (SEC) accused Terraform Labs and its founder and CEO Do Kwon of defrauding investors.

In early May 2022, the $60 billion Terra blockchain ecosystem collapsed in a matter of days after its algorithmic Terra USD Stablecoin lost its crucial $1 price peg and faced a banking crisis.

According to the complaint, from April 2018 through May 2022, Terraform and Kwon raised billions of dollars from investors by offering “an interlocking set of crypto-asset securities, many of which were issued in unregistered transactions.

Those assets included security-based swaps designed to mirror the price of U.S. stocks and Terra USD’s algorithmic stackablecoin and Terra’s native ecosystem cryptocurrency, LUNA.

Gensler said the agency also alleged that both Terraform and Do Kwon committed fraud by repeating false and misleading statements to build confidence before the collapse of the Terra blockchain ecosystem.