SEC files new charge for $#Terra stablecoin (Formerly $USTC ) #UST

The SEC alleged that Tai Mo Shan misled investors by creating the impression that Terraform Labs’ algorithmic mechanism maintained the $1 peg value of UST. When the value of UST fell below $1 in May 2021, Tai Mo Shan and Terraform Labs entered into an agreement to stabilize the price.

Under this agreement, Terraform offered Tai Mo Shan discounted LUNA tokens to encourage him to purchase UST and restore the peg. On May 19, 2021, Tai Mo Shan temporarily stabilized the stablecoin’s price by purchasing more than $20 million worth of UST.

LUNA’s Sale as Unregistered Securities

The SEC’s findings revealed that Tai Mo Shan acted as a legal guarantor for Terraform Labs and purchased LUNA tokens for resale on American-based platforms.

From January 2021 to May 2022, Tai Mo Shan offered and sold these tokens as securities without being registered. The SEC stated that LUNA was classified as a security and that Tai Mo Shan distributed the cryptocurrency to the public.

The SEC stated that Tai Mo Shan’s actions were misleading to investors and that he was unaware of the external intervention-based stabilization. The company did not admit to the SEC’s investigation allegations but agreed to comply with the stay order to prevent future violations of the federal securities laws.

Tai Mo Shan will pay $73.45 million in restitution, $12.91 million in prior litigation interest, and $36.72 million in penalties. These penalties are intended to compensate for illegal profits made through deceptive acts and unregistered transactions. Terraform Labs and its founder Do Kwon have previously faced fraud charges and are facing a 4th World WarHe agreed to pay $5 billion.