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.
