Terraform’s UST stablecoin imploded in May causing investors billions of dollars in losses.

A Bloomberg report on Thursday said the US SEC was investigating Do Kwon-led Terraform Labs, which backed the TerraUSD stablecoin (UST), for violations of statutory regulations that protected investors. The UST stablecoin crashed after it lost its 1-1 peg to the US dollar due to a shock decline in the related Luna token and a failure of the algorithm that was supposed to maintain the peg.

Bloomberg quoted an unnamed person familiar with the matter. The SEC declined to comment, though Terraform, based in Singapore, said it knew nothing of an SEC investigation into UST.

“We are not aware of any SEC probes into TerraUSD at this time – we’ve received no such communication from the SEC and are aware of no new investigation outside of that involving Mirror Protocol,” Do Kwon said in a separate statement. Kwon may also be drawn into the UST investigation.

Mirror Protocol

Kwon and Terraform are already under investigation by the SEC for their crypto project known as the Mirror Protocol which allows people to trade digital assets that track the price of US stocks. Earlier this week, the SEC won a hand in the case when Terraform lost its appeal and is now obligated to respond to the regulator’s subpoenas.

In November, the SEC served Kwon with a subpoena as he prepared to go onstage to speak at Messari’s MainNet event in Manhattan.

Implications for UST

This development may strengthen the SEC’s hand in the investigation of UST.

Attorney Philip Moustakis, who left the SEC to join Seward & Kissel’s blockchain and cryptocurrency practice, told The Block in an email:

“As the Second Circuit made clear, courts will find jurisdiction, including over foreign persons and issuers, where the US capital markets are accessed, tokens are promoted to US investors, and promoters facilitate secondary trading in the US.”

“I don’t see how the SEC or CFTC could not investigate the ashes of UST and Luna as well as other stablecoins and their issuers,” added Moustakis. “In fact, I would expect some coordination between the two agencies in this regard.”

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