Terraform Labs, the company at the center of a major collapse in 2022, has agreed to pay a substantial $4.47 billion settlement to resolve a civil suit brought by the U.S. Securities and Exchange Commission (SEC).
This legal action was taken following the collapse, which resulted in the loss of $40 billion in investor assets and sent shockwaves through the entire cryptocurrency industry.
Terraform Labs and Do Kwon responsible for the collapse
The SEC recently requested approval from a New York federal judge for the settlement with Terraform. The deal was reached after a jury found the company and its co-founder, Do Kwon, liable for the collapse following a two-week trial.
According to settlement deposit, “Payment of monetary relief against Kwon shall be deemed satisfied, provided that all transfers made by Kwon to the SEC and to the Terraform bankruptcy estate in connection with the bankruptcy total at least $204,320,196.” Transfer to an escrow account agreed to by Kwon and Commission staff $4,700,000 within 30 days of final judgment.
Victory for the SEC
The SEC allegations v. Terraform Labs and Kwon state that from at least April 2018 to May 2022, Terraform and Kwon offered and sold crypto assets “securities in unregistered transactions” and perpetrated a fraudulent scheme that resulted in the loss of at least $40 billion in market value.
Additionally, regulators alleged that the defendants misled investors about the stability of TerraUSD, falsely claiming that Terraform’s blockchain was integrated into popular Korean mobile payment apps.
Ultimately, this development represents a victory for the US SEC, since Terraform Labs and its founder Do Kwon, who faces extradition to the United States, had previously proposed civil penalties of up to $3.5 million, with Do Kwon seeking a penalty of $800,000.
As of this writing, the company’s Luna Classic (LUNC) token is trading at $0.0001076, up almost 8% over a 24-hour period.
Featured image from Shutterstock, chart from TradingView.com
