Terraform Labs and its founder Do Kwon have agreed to pay the United States Securities and Exchange Commission (SEC) roughly $4.5 billion in disgorgement, prejudgment interest, and civil penalties as part of its settlement with Wall Street’s top regulator.
Terraform And Do Kwon Liable For 2022 Collapse
Terraform Labs, currently in Chapter 11 bankruptcy protection, and its former CEO Do Kwon will fork out $4.47 billion after settling with the Securities and Exchange Commission. Under the proposed settlement plan, Terraform will pay $3.58 billion in disgorgement, a civil penalty of $420 million, and a prejudgment interest of $467 million.
The settlement deal will also permanently prohibit Kwon and Terraform Labs from trading crypto asset securities, which includes all of the tokens in the Terra ecosystem. Of the nearly $4.5 billion, Terraform and Kwon will pay to the agency, Kwon will personally pay roughly $204,320,196. The South Korean entrepreneur would also be blocked from becoming an officer or director of any public company.
This resolution comes after a New York jury in April found Terraform and Kwon liable for the Terra ecosystem implosion in May 2022, which obliterated at least $40 billion in investor money. The SEC lodged a lawsuit in February 2023, accusing the two of defrauding and misleading investors. Kwon, who is currently in Montenegro awaiting a decision on his extradition to either the U.S. or his home country South Korea, did not attend the two-week trial.
Win For SEC
Court filings show that Kwon and Terraform Labs’ current CEO, Chris Amani, agreed to the settlement terms on June 6. However, the settlement agreement must first be OK’d by Judge Jed Rakoff before it is made official.
“If approved, the proposed judgment will send an unmistakable deterrent message to not only those who engage in brazen misconduct but also to all those who seek to evade the requirements of the federal securities laws by crafting new standards of behavior for crypto assets that fall under the purview of the federal securities laws,” SEC said in the settlement filing.
Overall, the settlement represents a major victory for the Securities and Exchange Commission. The $4.5 billion fine is a tad lower than the $5.3 billion the SEC had previously proposed, but much higher than the slap on the wrist — a $1 million fine suggested by lawyers for Terraform and Kwon.
