TLDR
- Terraform Labs and its founder, Do Kwon, have agreed to pay the U.S. Securities and Exchange Commission (SEC) $4.5 billion in penalties to settle a civil fraud lawsuit.
- Terraform Labs will pay $4.47 billion, while Kwon will pay an additional $204 million.
- The settlement agreement, if approved by a federal judge, would also permanently ban Kwon and Terraform Labs from buying or selling crypto asset securities.
- Kwon is facing separate criminal charges from the U.S. Department of Justice and in South Korea related to the $40 billion collapse of the TerraUSD stablecoin and Luna cryptocurrency in May 2022.
- Kwon is currently in custody in Montenegro, awaiting a decision on his extradition to either the U.S. or South Korea.
Terraform Labs and its founder, Do Kwon, have reached an agreement to pay a massive $4.5 billion in penalties to the U.S. Securities and Exchange Commission (SEC) to settle a civil fraud lawsuit.
The settlement comes after a New York jury found Kwon and Terraform Labs liable for civil fraud charges in April, siding with the SEC’s allegations that they misled investors about the stability of the TerraUSD stablecoin and made other unsubstantiated claims.
According to the settlement agreement filed on Wednesday, Terraform Labs will pay $4.47 billion in penalties, while Kwon will personally pay an additional $204 million.
The SEC stated that Kwon’s penalty represents “nearly all the relief it sought against Kwon” for his misconduct and would “send an unmistakable deterrent message” to those engaging in similar behavior.
The agreement, if approved by U.S. District Court Judge Jed Rakoff of the Southern District of New York, would also permanently prohibit Kwon and Terraform Labs from engaging in any transactions involving crypto asset securities, including all tokens in the Terra ecosystem.
The SEC’s lawyers urged the judge to approve the settlement, stating that it would deter “brazen misconduct” and those seeking to evade federal securities laws by crafting new standards for crypto assets.
Terraform Labs Agrees to Pay $4.47 Billion Penalty in SEC Civil Lawsuit.
But Terraform Lab only have $75M in assets in their known wallet.
I'm just curious, where's that extra $3.75B coming from?👀 pic.twitter.com/XlHMVEirif
— Elja (@Eljaboom) June 13, 2024
The settlement stems from the high-profile collapse of Terraform Labs’ TerraUSD stablecoin and its accompanying Luna cryptocurrency in May 2022.
The implosion, which wiped out nearly $40 billion in market value, was a significant event that sparked a broader crypto market downturn and the eventual bankruptcy of major crypto exchange FTX.
While Kwon and Terraform Labs have agreed to the civil settlement with the SEC, they are facing separate criminal charges related to the Terra collapse.
In March 2023, the U.S. Department of Justice filed criminal fraud charges against Kwon, and South Korean authorities have accused him of financial crimes, including fraud, bribery, and manipulating transaction volume.
Currently, Kwon is in custody in Montenegro, where he was arrested in December 2022 while attempting to travel with a falsified passport.
An extradition battle is ongoing, with both the U.S. and South Korea seeking to bring Kwon to their respective countries to face the criminal charges.
