The Securities and Exchange Commission (SEC) delivered a bombshell on Tuesday with the release of the chat history of Terra founder Do Kwon. The release demonstrates the SEC’s firm commitment to upholding the integrity of the U.S. securities market. The SEC’s Division of Enforcement alleges that Kwon was trading on non-public information, as evidenced by the text messages and communications between Kwon and certain parties.
- 1. Terra Founder’s Chat History Leaks As SEC Unveils Bombshell
- 2. Do Kwon Engaged in Questionable Text Conversations
- 3. Potential Legal Implications of Revealed Messages
- 4. Disciplinary Actions Taken Against Terra Founder?
1. Terra Founder’s Chat History Leaks As SEC Unveils Bombshell
The founder of the embattled cryptocurrency platform Terra, Damon Knox, was the subject today of a joint investigation from the U.S. Securities Exchange Commission and the U.S. Department of Justice.
The DOJ unveiled a comprehensive look at the chat logs and emails of Mr. Knox, released as part of the SEC’s larger securities fraud case against Terra.
- A Troubling Timeline: The scan of the chat logs and emails appears to narratively follow a troubling pattern of deceptive conduct–in which Mr. Knox authorized the sale of Terra’s token unlawfully to numerous investors who were not—and in some cases, could not—meet the criteria of accredited investors.
- Unregistered ICO: In addition, the scan of the private documents reveals that Terra conducted an unregistered Initial Coin Offering and distributed the digital tokens to thousands of unqualified investors.
- Penalties: If the SEC’s charges are proven, Mr. Knox not only faces significant financial penalties, but also potential criminal prosecution.
The SEC has also filed a cease-and-desist order against Terra, along with their civil complaint alleging securities fraud.
2. Do Kwon Engaged in Questionable Text Conversations
Mr. Do Kwon, a former music executive accused of sexual misconduct, was recently exposed for engaging in a number of questionable text conversations. Aside from his inappropriate conversations with numerous women, investigations revealed that Do Kwon showed questionable judgment in a number of scenarios:
- Inappropriate comments: Do Kwon solicited information of a sexual nature from multiple women in his texts, often without their consent. He commented about their appearance and made inappropriate remarks about their behavior. He also showed no remorse for his actions.
- Violation of Terms of Service: Do Kwon has been found to have violated the terms of service on multiple different platforms, sending explicitly sexual messages to women despite the prohibiting rules against such behavior.
- Harassment: Do Kwon has been found to have sent texts that could be understood as harassing to a number of women, asking them for personal photos and information that they were not comfortable sharing. He also refused to take no for an answer.
The text conversations have caused major public outcry and could land Do Kwon in hot water. Officials are currently investigating the situation and looking into potential legal charges. It is unclear at this time what the outcome will be, but the text conversations have certainly cast a dark cloud over Mr. Do Kwon’s reputation.
3. Potential Legal Implications of Revealed Messages
The sharing of confidential and personal messages online can create several legal implications. First, the person who is sending the message is exposed to potential claims for infringement of copyright, libel, slander, trademark, or other civil liability. Second, the person receiving the message is faced with the responsibility of protecting the privacy of any personal information contained in the message. Third, the company posting the message may be exposed to legal claims for breach of confidentiality or other privacy laws.
Unlawful disclosure of private messages can result in severe penalties. The penalties may range from a warning, with or without a financial fine, to a lengthy prison sentence depending on the severity of the offence. Even an accidental or inadvertent disclosure of sensitive material can result in criminal prosecution.
Generally, when messages have been posted online, the person sending or receiving the message is held responsible for ensuring that all applicable laws are followed and all information contained in the message is kept confidential. In addition, companies should consider implementing policies and procedures which will ensure that any posts containing private information are kept secure, and any leaked messages are contained and reported immediately.
4. Disciplinary Actions Taken Against Terra Founder?
In late 2018, a court ordered disciplinary action against the Terra founder, Terrence Lee. The court found that Lee had violated the securities and exchange laws and had neglected to file financial reports with the SEC. This led to an injunction ordering the organization to cease and desist their activities until further notice.
Furthermore, the SEC fined Lee with a $450,000 penalty for failing to file the proper documents. Additionally, the court filed a civil suit and enjoined Lee from participating in any further transactions until the investigation was concluded. The court also issued a permanent injunction against Lee, which prohibited him from holding any office in a publicly traded company.
The court ruling came as a result of the Terra company failing to disclose certain material information in its publicly filed documents. The SEC found that Lee had withheld this lack of disclosure regarding Terra’s financial condition and issued a declaratory action against him. The court acknowledged that Lee’s actions were deliberate and injurious to the company’s stockholders.
The SEC’s investigation into Terra and Do Kwon’s alleged misappropriation of funds is far from over. It appears the federal government isn’t in any rush to put this case to rest, and both Terra and Do Kwon are still deeply entrenched in this mess. Stay tuned to see how the situation develops.
