The SEC has accused fugitive Terraform founder Do Kwon of multibillion-dollar crypto fraud linked to TerraUSD's collapse

• The SEC has charged fugitive crypto boss Do Kwon and his company Terraform Labs with alleged fraud.
• The suit is linked to the collapse of stablecoin TerraUSD which led to a $60 billion wipeout last year.

US regulators have charged fugitive Terraform Labs boss Do Kwon and his company with multibillion-dollar fraud linked to two cryptocurrencies whose failure sent reverberations through the market.

The Securities and Exchange Commission has accused them of misleading US investors about the stability of algorithmic stablecoin TerraUSD, or UST, which was meant to be pegged to the US dollar. Its civil fraud lawsuit filed Thursday also alleges they fooled people about Terra's sister token luna.

"As alleged in our complaint, 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," SEC enforcement head Gurbir Grewal said in a statement.

At the same time, the SEC is also charging Terraform and Kwon over the sale of unregistered securities, the markets regulator said.

"Today's action not only holds the defendants accountable for their roles in Terra's collapse, which devastated both retail and institutional investors and sent shock waves through the crypto markets, but once again highlights that we look to the economic realities of an offering, not the labels put on it," he added.

The collapse of TerraUSD in May last year shook the digital-asset industry after it lost its 1-to-1 peg to the dollar. Its sister token luna dropped more than 97% after failed rescue efforts in what analysts labelled a "death spiral." Their crash downfall wiped out a combined market value worth $60 billion at its peak.

That battered companies with exposure to UST and luna, and a series of collapses has been linked to the crash. They include the now-defunct Three Arrows Capital and digital asset brokerage Voyager.

Terraform boss Kwon is at the center of a manhunt, with his whereabouts unknown. He became a fugitive after South Korean authorities put out an arrest warrant for him.

Meanwhile, the SEC appears to have launched a big crackdown on the crypto industry after the implosion of exchange FTX, whose founder and former CEO Sam Bankman-Fried faces fraud charges. Crypto giant Kraken agreed a $30 million settlement with the regulator and agreed to end its staking services in the US, after the SEC began an investigation.