According to sources, SEC enforcement attorneys are also looking into whether Terraform Labs, the company behind the coin known as UST, violated securities and investment products regulations. Through an algorithm and trading in a related token called Luna, the stablecoin was designed to maintain a 1-to-1 peg to the US dollar.
It all started with the collapse of UST, which started on May 7 and sent shock waves through the cryptocurrency markets. Treasury Secretary, Janet Yellen, Said the incident clearly underscored the dangers of the coin to the US dollar, and Michael Hsu, the acting US comptroller of the currency, later dubbed it a “wake up call”.
The SEC is also keen on the UST perspective
As Bloomberg reports, Terraform and its CEO, Doe Kwon, are already under scrutiny by the SEC for promoting the ‘Mirror Protocol’—which allows consumers to exchange digital assets that mimic the price of US stocks. allows to provide. Terraform and Kwon have not been charged with any misconduct in relation to UST.
Mirror Protocol’s reputation takes a hit
Surprisingly, the Securities and Exchange Commission (SEC) has not said anything about this. In a response, Singapore-based Terraform Labs said it was unaware of the SEC’s investigation into UST.
“At this time, we are not aware of any SEC investigation involving TeraUSD – we have not received any such information from the SEC and are not aware of any additional investigations outside of the Mirror Protocol investigation,” Kwon said in a second statement.
SEC may have power over all virtual currencies
In the crypto world, stablecoins are essential because their relatively stable prices can provide a haven for many investors in a volatile market. Unlike other cryptocurrencies that claim to be backed by cash and other assets, UST relies on algorithms and trading incentives to maintain a constant value.
Each time a UST token was created, one dollar worth of Luna was destroyed (whose value was determined by the market), and vice versa. Traders were tempted to swap UST for the Luna if the price fell below $1, reducing the amount of the former in circulation and driving up its price. To achieve the same result, a computer program will be used. If the value of UST exceeds $1, the opposite happened.
For example, if Americans receive virtual currency to fund a corporation or project to profit from the efforts of the individuals involved, the virtual currency may fall under the jurisdiction of the SEC. This conclusion is based on a 1946 Supreme Court decision that defined investment contracts in the United States. If a crypto firm has assets, the agency believes it may be subject to investment-company sanctions.
According to the controller, the allegations were based on the discovery that BlockFiInc, a popular crypto platform, was operating as an unregistered investment company in February.
“Because it is an issuer of securities engaged in the business of investing, reinvesting, maintaining, holding, or trading in securities and maintaining investment securities,” the controller said.
Without admitting to the disputed offenses, the business agreed to pay $100 million in forfeitures to the SEC and state controllers.
The entire ecosystem has seen the demise of Terra. It was one of the biggest cryptocurrency busts of all time, wiped out tens of billions of dollars worth. Terraform’s blockchain and Luna token, which fell to near zero during the fiasco, have been revived under new names. The TeraUSD stablecoin is no longer available in the updated version.
In addition, according to Bloomberg News, Seoul police are investigating allegations that Terraform Labs workers misappropriated bitcoin holdings to maintain USD pegs. Mail seeking comment on the investigation did not elicit a quick response.
bulls criticize the explosion
Michael van de Poppe, a popular crypto analyst commented that he ‘couldn’t believe’ that Do Kwon was depositing $80 million into his bank accounts. He said that Kwon deserves jail like other defaulters.
During this, Lark Davis Commented that “this nuisance is bigger than it looks”.
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