Terraform Labs has agreed to settle with the United States Securities and Exchange Commission (SEC) by paying approximately $4.47 billion. The settlement includes disgorgement fines of about $3.6 billion, a civil penalty of $420 million, and prejudgment interest totaling nearly $467 million.
This agreement comes after Terraform Labs and its co-founder were found responsible for the collapse of the Terra ecosystem, resulting in the loss of $40 billion in investor assets.
As per the terms of the settlement, former Terraform Labs CEO Do Kwon is required to pay $110 million in disgorgement fines, $80 million in civil penalties, and around $14.3 million in prejudgment interest. The settlement also outlined the immediate actions to be taken, including the transfer of all crypto assets owned by the Luna Foundation Guard and all Pyth Network (PYTH) token holdings from Kwon to cover the fines, with any excess proceeds to be used for the civil penalties.
The SEC’s case against Terraform Labs dates back to 2023 when the firm and Kwon were accused of selling unregistered securities and deceiving investors following the collapse of the Terra ecosystem.
In 2022, the TerraUSD algorithmic stablecoin began showing instability, leading to a mass exodus of investors from the Terra ecosystem, resembling a bank run. Subsequently, TerraUSD lost its peg to the dollar and crashed, resulting in significant losses for asset holders.
The future of Do Kwon remains uncertain as courts in Montenegro deliberate on whether to extradite him back to South Korea or the United States to face charges. The high court in Montenegro is currently reviewing the extradition decision, with ongoing appeals citing procedural errors in the lower courts.
As the legal proceedings continue, the fate of Do Kwon and the repercussions of the Terra ecosystem collapse remain a topic of interest and speculation.