SEC and Terraform Labs Do Kwon Settle for 447 Billion
Terraform Labs and its founder, Do Kwon, have reached a settlement with the U.S. Securities and Exchange Commission (SEC) for defrauding investors in the collapse of TerraUSD (UST) and Luna tokens. The SEC has approved a $4.47 billion settlement, which includes a $4.05 billion payment for disgorgement and interest, a $420 million civil fine for Terraform Labs, and an $80 million civil fine for Do Kwon. As part of the settlement, Do Kwon is required to send $204.3 million to Terraform’s bankruptcy estate and is banned from engaging in crypto transactions.
The collapse of Terraform Labs’ tokens in 2022 resulted in a loss of $40 billion in value and had a significant impact on the crypto ecosystem. In response to the settlement, Terraform Labs plans to dissolve its operations, and CEO Chris Amani has called on the community to take over the Terra network.
The settlement, filed in the Manhattan federal court and pending approval from U.S. District Judge Jed Rakoff, aims to ensure the maximum return of funds to harmed investors and permanently shut down Terraform Labs. The collapse of TerraUSD (UST) and Luna tokens in 2022 led to significant losses, with UST losing 99.9% of its value in less than a week due to a massive market sell-off.
Following the settlement, Terraform Labs’ CEO, Chris Amani, announced the firm’s intention to sell its projects in the Terra ecosystem and proposed a community-led initiative to burn all unvested Luna tokens. The SEC’s charges against Terraform Labs and Do Kwon, initially filed in February 2023, accused them of misleading investors and violating federal securities laws.
The settlement not only imposes financial penalties but also prohibits Kwon from serving as an officer or director of any public company.
