Terraform Labs has reached a settlement agreement with the US Securities and Exchange Commission (SEC), requiring it to pay a fine of $4.47 billion.
This settlement came against the backdrop of lawsuits related to the company’s fraudulent activity related to the “Terra” blockchain system that collapsed.
In a letter to U.S. District Judge Jed Rakoff on Wednesday, the SEC asked for approval of a proposed final consent ruling involving the company and its co-founder Do Kwon.
The Authority confirmed that this huge penalty reflects the scale of the fraud and allows for a quick recovery of the billions lost by investors in the “Terra” network.
The message stated:
As part of the settlement of this case, TERRAFORM LABS agrees to provide all remedies requested by the court.
That includes $3.6 billion in restitution, $466 million in pre-judgment interest, as well as a $420 million civil penalty, numbers close to what the panel requested in April.
For his part, Do Kwon agreed to pay almost all of the required penalties, including $204 million that will be fully directed to the bankruptcy company Terraform Labs to support affected investors.
In 2023, the Securities and Exchange Commission charged Terraform and Do Kwon with securities fraud after the collapse of the Terra network, which resulted in losses estimated at $44 billion due to the fall of the cryptocurrencies LUNA and UST.
Last April, a jury found Terraform and Do Kwon guilty of misleading investors and willful fraud.
The Securities and Exchange Commission confirmed that issuing this ruling will ensure maximum financial returns for affected investors, and will permanently put “Terraform” out of business.
If approved, the settlement would be the largest settlement in a cryptocurrency fraud case to date, surpassing Binance's $4.3 billion settlement with the Department of Justice last November.
However, some question whether Terraform or Do Kwon will be able to provide the funds needed to pay these fees.
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