Lisa Braganca, a former enforcement branch chief at the U.S. Securities and Exchange Commission, believes that U.S. law enforcement could exercise jurisdiction over Singapore-based Terraform Labs and its founder Do Kwon if they deliberately marketed their LUNA and terraUSD (UST) stablecoins to U.S. investors. According to Braganca, the SEC alleges that Kwon and his associates were specifically targeting their pitch to U.S. investors and receiving investment funds from them, regardless of their location.
Kwon was arrested at the airport in Montenegro’s capital city of Podgorica on Thursday, and New York federal prosecutors subsequently filed criminal charges against him for fraud. On Friday, he faced charges of forgery and is currently undergoing extradition proceedings. South Korean authorities had issued a warrant for his arrest in September 2022 on charges of fraud, following the significant loss in value of the UST and LUNA stablecoins, for which Kwon is a South Korean national.
Braganca further explained that the SEC is charging Kwon and his colleagues for allegedly misleading investors about how the UST stablecoin was backed. Despite being intended to maintain a peg to the U.S. dollar, UST and LUNA failed to be stable as they were meant to be. Kwon had claimed that an algorithm was in place to stabilize the tokens, but that turned out not to be the case, Braganca said