Nearly a year after the demise of Terra and it’s UST stablecoin, the SEC is in pursuit. It’s the latest in a suite of regulatory hammers that the Securities and Exchange Commission has been bringing to the pavement in crypto lately.

Terraform Labs once operated what was considered the dominant decentralized stablecoin UST – and was building a robust defi ecosystem before the cards collapsed in the first half of 2022. While Terraform Labs co-founder and CEO Do Kwon maintained his innocence on public platforms, crediting Terra’s downfall to that of a targeted attack on the network, the SEC will look to present a formidable challenge for Kwon and company to present their case – arguably for the first time yet.

A press release from the commission that hit the wire on Thursday details that the US commission has charged Kwon and Terraform Labs with “orchestrating a multi-billion dollar crypto asset securities fraud” through the algorithmic UST stablecoin and surrounding securities.

The document starts with Mirror – the decentralized platform built on Terra that allowed users to trade mirrored assets of actual securities. At one point in the early days of Mirror, some users were ‘looping’ assets with leverage based on existing securities traded on federal exchanges. The press release calls out Mirror’s MIR token, the UST stablecoin, and Luna’s native LUNA token directly.

Additionally, the press release dives into Terra’s flagship product, Anchor. Anchor was the bread and butter of the ecosystem, touting a clean and straightforward UI and a consistent 20% interest rate on the UST stablecoin. At the high point just before Terra’s downfall, Anchor was home to several billions of dollars of liquidity. The SEC complaint alleges that Kwon and Terraform Labs “misled and deceived investors” around a variety of topics, including the stability of UST.

In a statement included in the release, Securities and Exchange Commission head Gary Gensler claims that Kwon and Terraform Labs “failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD.” The Director of the commission’s Division of Enforcement, Gurbir S Grewal, added that the “Terraform ecosystem was neither decentralized, nor finance. It was simply a fraud propped up by a so-called algorithmic “stablecoin” – the price of which was controlled by the defendants, not any code.”

In a statement included in a first-look report by Bloomberg, Terraform Labs reserved comment, only stating that the firm “has not been contacted about such a proceeding by the SEC and thus cannot comment.”

Kwon, once known for his over-confident and cocky approach on Twitter, hasn’t been seen on the platform on over two weeks and has long maintained – on Twitter, on podcast appearances, and elsewhere – that he is “not on the run” despite swirling discussions of an Interpol red notice. Now, there is little question around the veracity of that claim.

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