TLDR
The SEC has reached a $4.47 billion settlement with Terraform Labs and its founder, Do Kwon, for defrauding investors in the collapse of TerraUSD and Luna tokens.
The settlement includes $4.05 billion in disgorgement and interest, a $420 million civil fine for Terraform Labs, and an $80 million civil fine for Do Kwon.
Do Kwon is required to send $204.3 million to Terraformâs bankruptcy estate and is banned from crypto transactions.
In 2022, Terraform Labsâ tokens collapsed, losing $40 billion in value and severely impacting the crypto ecosystem.
Terraform Labs plans to dissolve its operations, and CEO Chris Amani has asked the community to take over the Terra network.
The U.S. Securities and Exchange Commission (SEC) has reached a $4.47 billion settlement with Terraform Labs and its founder, Do Kwon, for defrauding investors in the collapse of TerraUSD (UST) and Luna tokens.
The proposed final judgment, filed in the Manhattan federal court on June 12, 2024, is pending approval from U.S. District Judge Jed Rakoff.
Under the terms of the settlement, Terraform Labs is expected to pay $4.05 billion in disgorgement and interest, along with a $420 million civil fine.
Do Kwon, the co-founder and former CEO of the Singapore-based cryptocurrency firm, has been imposed an $80 million civil fine and is required to send $204.3 million to Terraformâs bankruptcy estate. Additionally, Kwon has agreed to a ban on crypto transactions.
The SECâs decision comes after a New York civil jury found Do Kwon liable for defrauding investors by false pretense in April 2024. The judgment aims to ensure maximum return of funds to harmed investors and put Terraform Labs out of business permanently.
The SEC maintains that Terraform Labs is still in control of hundreds of millions of dollars from the Terra ecosystem.@tikta_ reportshttps://t.co/pwuaumPlGp
â Laura Shin (@laurashin) June 13, 2024
In 2022, Terraform Labsâ tokens, TerraUSD (UST) and Luna, collapsed, losing $40 billion in value and severely impacting the entire crypto ecosystem. UST, a stablecoin pegged to the U.S. dollar, was designed to maintain its value through an algorithm that transacted with Luna.
However, in May 2022, the market experienced a massive sell-off, causing the stablecoin to de-peg from the USD and lose 99.9% of its value in less than a week.
Following the settlement, Terraform Labsâ CEO, Chris Amani, announced that the firm plans to dissolve its operations and urged the community to take over the reins of the Terra network. Amani stated that Terraform Labs intends to sell its projects in the Terra ecosystem, including Pulsar Finance, Station Wallet, and Enterprise DAO.
He also proposed a community-led initiative to burn all unvested Luna tokens, with any remaining vested tokens in Terraform Labsâ wallets to be burned by the company.
The SECâs charges against Terraform Labs and Do Kwon, initially filed in February 2023, accused them of misleading investors and violating federal securities laws by engaging in fraudulent activities related to the sale of unregistered securities.
The settlement not only imposes financial penalties but also prohibits Kwon from serving as an officer or director of any public company.
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