Traders Flinch as SEC Goes After Do Kwon, With AI Cryptos Hit Hard
The AI token category stood out as the weakest sector on the day while layer-2 tokens held their ground amid minor market volatility

Source: Shutterstock / WindAwake, modified by Blockworks
Artificial intelligence-related tokens took a beating Thursday as markets stooped amid revelations the SEC had charged Terraform Labs’ CEO and fugitive, Do Kwon, with fraud.
Top AI tokens, including SingularityNet’s (AGIX), Fetch.ai’s (FET) and Artificial Liquid Intelligence’s (ALI) sank 14%, 12% and 11.5% respectively, representing some of the worst impacted assets above a $200 million market cap over the past 24 hours.
The market value for the entire AI sector dipped 11.2% from yesterday’s reading of $2.14 billion to $1.9 billion, marking the industry’s worst-performing sector, data provided by CoinGecko show.
Today’s decline can be viewed as a continuation of the unwinding occurring across AI-related digital assets following their incredible run up earlier this year. FET’s year-to-date performance for example — which began in earnest immediately following Jan. 1 — is a gain of 360%.
AGIX is soaring high, posting an eye-watering 800% gain this year, while ALI and Ocean Protocol’s (OCEAN) are up 610% and 174% respectively. Related AI projects have been riding shotgun alongside a renewed interest in the underlying tech sector’s success from the likes of OpenAI’s ChatGPT and DALL·E 2.
It would appear, for now, traders are yet to concede on the bullish momentum driving associated AI tokens and projects higher.
Stablecoin in/out flows remained fairly mixed with Tether’s USDT exhibiting a greater flow out of exchanges than in, signaling traders are opting to remain long by keeping assets off centralized platforms, data from IntoTheBlock show.
By comparison, major cryptos ether and bitcoin are down around 2.2% and 3.5% over a 24-hour period but remain squarely in the green in YTD terms, up around 38% and 42%. Other top 20 cryptos, while down around 1% and 6% on the day, continue to hold their head above water on a YTD basis.
SEC moves against Terraform’s Do Kwon
The latest bout of volatility comes as Terraform’s Do Kwon was slapped with two charges late Thursday over allegations he violated US securities laws last year and deceived investors on a number of “inter-connected suite of crypto asset securities.”
Traders began to sell into the news, forcing bellwether crypto bitcoin -3.3% lower on the day to roughly $23,400. The asset was last seen trading at around $23,800 good for around a 1.8% bounce, TradingView data show.
Questions continue to hang overhead like a sword of Damocles on how exactly the Securities and Exchange Commission intends to regulate crypto, as well as its intentions to forge ahead with its own definition of what constitutes crypto asset securities.
Blockworks was told Wednesday the crypto ecosystem could see regulatory volatility throughout 2023.
While AI tokens took a hit, those associated with layer-2 projects and protocols remained steady, posting a roughly 6% jump in market value collectively from $14.6 billion to $15.6 billion, CoinGecko data show.
In the face of depreciating values and market uncertainty, the sector represented the strongest-performing category on the day. Assets belonging to proof-of-stake sidechain Polygon (MATIC), which is also launching a layer-2 zkEVM, and Loopring (LRC) which were up between 6% and 2% respectively over the last 24 hours and showed little sign of capitulation from intra-day traders.
Read more: Will The SEC Staking Hammer Hit Validators and Protocols Next?
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