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SEC and Terraform Labs Settle for $4.47 Billion

Key Takeaways

  • Terraform Labs settles with the SEC for $4.47 billion following a jury's decision holding the company and its co-founder accountable for the Terra ecosystem collapse;
  • The settlement includes $3.6 billion in disgorgement fines, $420 million in civil penalties, and $467 million in prejudgment interest; Do Kwon faces additional personal fines;
  • Montenegro courts still deliberate on Do Kwon's extradition to either the US or South Korea.
SEC and Terraform Labs Settle for $4.47 Billion

Terraform Labs has reached a settlement with the US Securities and Exchange Commission (SEC), agreeing to pay $4.47 billion.

This follows a jury's decision that found Terraform Labs and its co-founder responsible for the collapse of the Terra ecosystem, which resulted in a $40 billion loss for investors.

The settlement includes $3.6 billion in disgorgement fines, a $420 million civil penalty, and approximately $467 million in prejudgment interest.

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Former Terraform Labs CEO Do Kwon personally faces $110 million in disgorgement penalties, $80 million in civil penalties, and about $14.3 million in prejudgment interest fines. The settlement filing specifies:

Payment of the monetary remedies against Kwon shall be deemed satisfied, provided that all transfers by Kwon to the SEC and the Terraform bankruptcy estate in the Bankruptcy Case total no less than $204,320,196, excluding the value of any Terraform Crypto Assets transferred to the Terraform bankruptcy estate.

Kwon must deposit $4.7 million into an escrow account within 30 days of the final judgment. Additionally, all crypto assets held by the Luna Foundation Guard and Kwon's Pyth Network (PYTH) tokens will be used to cover the disgorgement fines and prejudgment interest, with any remaining funds going towards the civil penalties.

The SEC lawsuit against Terraform Labs, filed in 2023, accused the company and Do Kwon of selling unregistered securities and defrauding investors.

This came after the Terra ecosystem's collapse in 2022, triggered by the instability of the TerraUSD algorithmic stablecoin. The subsequent investor panic led to a massive withdrawal of funds, causing TerraUSD to lose its dollar peg and collapse, resulting in billions in investor losses.

Kwon's legal status is still unresolved as Montenegro's courts continue to deliberate on his extradition, repeatedly reversing their decisions between South Korea and the United States. His legal team argues that procedural errors have compromised the process, and Montenegro's high court is currently deciding his fate.

Overall, the settlement marks a significant step in addressing the legal repercussions following Terra's collapse.

Aaron S. , Editor-In-Chief
Having completed a Master’s degree in Economics, Politics, and Cultures of the East Asia region, Aaron has written scientific papers analyzing the differences between Western and Collective forms of capitalism in the post-World War II era.
With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He’s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.
Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain & Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.
Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.

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