The Southern District Court of New York issued the final verdict in the US Securities and Exchange Commission (SEC) lawsuit against Terraform Labs and co-founder Do Kwon on June 12. Accordingly, Terraform Labs and Do Kwon were convicted of violating many securities regulations and had to pay a total fine of nearly 4.5 billion USD, including 3.6 billion USD in damages and 467 million USD in interest. before trial and $420 million in civil penalties.
Do Kwon is also jointly and severally liable for $110 million in compensatory damages and $14.3 million in pre-trial interest. In addition, the former CEO of Terraform Labs must transfer many assets, including ownership shares in the PYTH token and other assets, to Terraform's bankruptcy fund. These assets will be used to pay fines and distributed to aggrieved investors.
According to Coindesk, Do Kwon and Terraform Labs have agreed to a fine settlement agreement from June 6.
In addition to the $4.5 billion fine, Do Kwon also faces additional sanctions. The SEC reserves the right to recover the fine by any means permitted, including suing Do Kwon in court if he fails to comply with the asset transfer order within 30 days. Do Kwon is also permanently barred from serving as chief executive officer or director of any issuer with a registered securities class or reporting obligation.
Judgment from the Southern District Court of New York
The ruling also prohibits Terraform Labs and Do Kwon from violating anti-fraud regulations, trading in unregistered securities, trading in digital asset securities, or soliciting others to trade in digital asset securities in the future.
The ruling allows Terraform Labs to dispose of digital assets during the bankruptcy process with the court's permission. However, the company must also destroy wallet keys and burn tokens as required. Terraform Labs may also allow third parties to withdraw funds, unstake and unstake positions on its platform.
The SEC's lawsuit against Terraform Labs and Do Kwon dates back to February 2023, accusing the company of defrauding cryptocurrency investors, including through the use of the collapsed Terra USD (UST) stablecoin. This ruling marks a victory for the SEC, and sends a clear message about the importance of regulatory compliance for the cryptocurrency industry.