TLDR
- Terra founder Do Kwon and Terraform Labs reached a tentative settlement with the U.S. Securities and Exchange Commission (SEC) in their civil fraud case related to the TerraUSD collapse.
- The settlement news caused a spike in the prices of Terra (LUNA) and Terra Classic (LUNC) cryptocurrencies.
- The SEC had accused Kwon and Terraform Labs of misleading investors about the stability of the TerraUSD stablecoin and making false claims.
Terra founder Do Kwon and Terraform Labs reached a tentative settlement with the U.S. Securities and Exchange Commission (SEC) in their civil fraud case.
This agreement came after a New York jury found them liable for misleading investors about the stability of the TerraUSD stablecoin in April.
The news of the settlement triggered a surge in the prices of Terra (LUNA) and Terra Classic (LUNC) cryptocurrencies.
LUNA experienced the most substantial gain, jumping by over 30% to reach highs of $0.77, before settling at $0.69, up 16.3% in the past 24 hours.
LUNC also saw a notable increase, rising by more than 10% to $0.0001284, and currently trading at $0.0001215, up 9.5% in the past day.
The SEC had alleged that Terraform Labs and Kwon made false statements about the stability and security of TerraUSD, an algorithmic stablecoin designed to maintain a one-to-one peg with the U.S. dollar.
The regulator accused them of failing to disclose significant risks and falsely claiming their blockchain technology was used in a prominent Korean mobile payment app. They were also alleged to have misrepresented liquidity and trading volume.
The collapse of TerraUSD in May 2022 was a seismic event in the cryptocurrency industry, resulting in estimated investor losses of over $40 billion.
It was widely regarded as a key trigger in a broader market downturn, dubbed the “crypto winter.”
While the specific terms of the SEC settlement remain confidential at this stage, both parties are expected to finalize and submit the agreement for court approval by June 12th.
However, it is important to note that this tentative settlement does not mark the end of Kwon’s legal troubles.
The Terra founder still faces criminal fraud charges brought by the U.S. Department of Justice (DOJ), as well as charges of fraud, bribery, manipulating transaction volume, and violating capital markets laws in his native South Korea.
Following Kwon’s arrest in Montenegro on false passport charges in December 2023, the U.S. and South Korea have been engaged in a months-long jurisdictional battle to extradite him, with requests repeatedly being approved and rejected by Montenegro’s courts.
As the legal proceedings continue, the cryptocurrency community is closely watching the developments surrounding Do Kwon and the Terra ecosystem.
While the market has reacted positively to the news of the SEC settlement, the long-term implications and potential ramifications for the industry remain to be seen.
