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The Securities and Exchange Commission (SEC) has filed a lawsuit against Terraform and its chief executive Do Kwon over the alleged illegal offering of securities.
According to the complaint, Terraform sold “so-called STACK tokens” to investors in violation of federal securities laws. The STACK tokens, worth $25 million, were being used as a medium of exchange in an online marketplace, where goods and services are exchanged. The complaint states that the tokens were marketed to potential investors as investments that would give investors “an opportunity to participate in the success of the online marketplace” and to earn returns by holding on to the tokens.
However, the SEC claims that the tokens were in fact securities and that Terraform failed to register them with the SEC or to provide investors with required disclosures about the risk associated with the investment. The SEC further alleges that Do Kwon, Terraform’s CEO, made misleading statements about the tokens and Terraform’s business plan.
The SEC is seeking a permanent injunction to prevent Terraform and Do Kwon from engaging in any further violations of the federal securities laws. The SEC is also seeking an order requiring the company to pay civil penalties, disgorgement of ill-gotten profits, and an unspecified amount of interest.
This case serves as a reminder to all companies that any activity related to the offer or sale of securities must comply with federal securities laws.
