WASHINGTON: The Securities and Exchange Commission said Thursday it has charged crypto entrepreneur Do Kwon, and the firm he co-founded called Terraform Labs, “with orchestrating a multi-billion dollar crypto asset securities fraud.”

The collapse of Terraform Labs last year wiped out about $40 billion of investors’ money and shook global crypto markets.

South Korean prosecutors previously asked Interpol to issue a red notice for Kwon, saying he refused to cooperate with their probe into the crash.

On Thursday, the SEC alleged that from 2018 to 2022, Terraform and Kwon “raised billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions.”

This included TerraUSD, a stablecoin said to maintain its peg to the US dollar by being interchangeable for another of the defendants’ crypto asset securities, Luna.

The SEC complaint also said that Terraform and Kwon “repeatedly misled and deceived investors” that a popular Korean mobile payment app had used the Terra blockchain to settle transactions that would accrue value to Luna, according to a statement.

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“As alleged in our complaint, the Terraform ecosystem was neither decentralized, nor finance,” said Gurbir Grewal, director of the SEC’s enforcement division.

“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,” he added.

Kwon’s Terra/Luna system disintegrated in May last year, with the price of both tokens plummeting to near zero. The fallout hit the wider crypto market.

Stablecoins are designed to have a relatively fixed price and are usually pegged to a real-world commodity or currency.

Many investors lost their life savings when Luna and Terra entered a death spiral, and South Korean authorities had opened multiple criminal probes into the crash.