- Terraform Labs settled with the SEC for $4.47 billion after the TerraUSD and Luna collapses.
- Do Kwon faces $80 million in fines and a ban from crypto transactions.
After being discovered guilty of misleading cryptocurrency investors, Terraform Labs and the U.S. Securities and Exchange Commission (SEC) achieved a historic $4.47 billion civil settlement, according to Reuters.
The jury came to the conclusion that when the TerraUSD and Luna tokens crashed in 2022, investors lost an estimated $40 billion.
SEC reaches $4.47 bln settlement with now-bankrupt crypto firm Terraform Labs https://t.co/m9aardrTDa pic.twitter.com/xdCHYpAveM
— Reuters (@Reuters) June 12, 2024
Proposed Final Judgment Filed
A proposed final judgment was submitted on Wednesday in the Manhattan federal court on behalf of Terraform and its founder, Do Kwon. U.S. District Judge Jed Rakoff, who oversaw the trial that ended on April 5, must approve this ruling.
The ruling calls for $420 million in civil penalties in addition to $4.05 billion in disgorgement plus interest.
But given that Terraform declared bankruptcy in January, it seems doubtful that much of this sum will be paid. As such, the ruling will be handled in the Chapter 11 case—in which Terraform is liquidating—as an unsecured claim.
Additional Penalties for Do KwonÂ
The entire verdict is $4.55 billion, of which Kwon must pay an $80 million civil penalty. He also consented to be prohibited from making cryptocurrency transactions and to send $204.3 million to Terraform’s bankruptcy estate.
The SEC said in a court document that “entry of this judgment would ensure the maximal return of funds to harmed investors and put Terraform out of business for good.”
“This proposed judgment is thus just, reasonable, and in the public interest.” Kwon and Terraform both agreed to the ruling, but their attorneys did not answer calls for comment right away.
The SEC charged that Terraform and Kwon misled investors about the stability of TerraUSD, which Kwon created to keep the price at $1.
They also said, in error, that a well-known Korean mobile payment app used Terraform’s blockchain. When TerraUSD lost its dollar peg in May 2022, the nearly related Luna token—another Kwon creation—collapsed.
Do Kwon’s Detention and ExtraditionÂ
Kwon has been held in Montenegro since March 2023; hence, he was not present for the trial, building on previous reports by ETHNews. Though Kwon has refuted any involvement, both the US and South Korea are requesting his extradition to face criminal charges.
Meanwhile, Luna Classic (LUNC) is now trading at about $0,0001035 according to CoinMarketCap data, up 2.45% from the previous day. It has, nevertheless, demonstrated a bearish tendency during the last week, falling 13.32%.