SEC Sues Over TerraUSD Stablecoin Issuance
By:C, FionaThe SEC has announced that they are to sue Terraform Labs and Do Kwon over the TerraUSD “stablecoin” issuance, which was one of the most notorious implosions in the bear market in 2022.
There were many high-profile implosions in 2022, but the stablecoin backed by nothing but hot air was one of the most remarkable collapses of them all, since the fundamentals of the concept meant that as soon as confidence was lost in Kwon’s ability to back the stablecoin, it entered a death spiral in which the price fell by almost 100% within a matter of days.
This was one of the most significant implosions of the entire bear market, since the collapse of UST (which many, such as Raoul Pal, had been relying on for “risk-free yield”) sparked a domino effect that began a chain of toppling many large industry titans, whether they had exposure to the stablecoin directly or not.
Whilst some have claimed that Do Kwon’s handling of the debacle amounts to negligence, incompetence and hubris rather than malevolence (and therefore he ought not be treated nearly as badly as characters like Alex Mashinsky or Sam Bankman-Fried).
The significance of claiming that UST and LUNA constitute securities in their lawsuit is that Do Kwon may now also face penalties for issuing unregistered securities, which comes with a substantial fine in the US.
The news comes as the U.S. seeks to crack down on a range of different unregistered securities, with the SEC looking to provide investors with more clarity in terms of proper regulation. No doubt more alternative coins will be targeted by the SEC in the coming months.
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