Terraform Labs, in an effort to conclude the civil lawsuit by the United States Securities and Exchange Commission (SEC), has agreed to an approximate payment of $4.47 billion. This settlement came as a response to the debacle following Terraform’s implosion in 2022. Fines measured in the agreement comprise approximately $3.6 billion in disgorgement fines, a civil charge of around $420 million, and an approximate interest of $467 million prior to judgment.
The civil lawsuit was initiated following a jury verdict that held Terraform Labs and its co-founder accountable for the disintegration of the Terra ecosystem, causing an investor loss of around $40 billion.
A part of the settlement includes former CEO of Terraform Labs, Do Kwon, who is held accountable for disgorgement penalties worth $110 million, civil penalties of $80 million, and about $14.3 million as pre-judgment interest fines. As per the settlement document, Kwon’s monetary remedies will have been considered fulfilled, given all transfers from Kwon to SEC amount to not less than $204,320,196. This excludes the value of any Terraform Crypto Assets transferred and is subject to Kwon completing the transfer of $4,700,000 into a consented escrow account within 30 days post-final judgment.
The file further demanded the transfer of all cryptocurrency assets owned by the Luna Foundation Guard and all Pyth Network (PYTH) token holdings from Kwon. This is to aid the cost of the disgorgement fines and prejudgement interest. The payment generated from the sale of these assets will be used to pay off the civil penalty fines.
The lawsuit filed by SEC against Terraform Labs commenced in 2023. It accused the fintech firm and its founder, Do Kwon, of defrauding investors by selling unregistered securities following the Terra ecosystem collapse. This collapse occurred when signs of instability started to show in the TerraUSD algorithmic stablecoin in 2022, prompting investor flight.
The fate of Do Kwon is yet to be determined as courts in Montenegro grapple with deciding an appropriate course of action. Kwon’s lawyers have argued that court proceedings were compromised due to incorrect procedures and filings by the lower courts. At this juncture, the high court in Montenegro is still deliberating on whether to extradite the Terraform founder back to South Korea, his native land, or to the United States to face the charges.