Terraform, Do Kwon to reach settlement of fraud with SEC
Terraform Labs and its former CEO Do Kwon have agreed in principle to settle fraud charges with the U.S. Securities and Exchange Commission, according to a court filing.
Attorneys representing the two sides announced the agreement in principle in a May 29 telephone conference before Judge Jed Rakoff. The settlement agreement is expected to be finalized and approved by the court by June 12, 2024.
Terraform and Coon were found guilty of defrauding investors in a civil case with the SEC in February. The parties were scheduled to discuss the issue on May 29.
The SEC's case focuses on Terraform and Quoon for the misleading promotion and sale of crypto tokens, specifically the algorithmically stable coin TerraUSD (UST) and Terra-related tokens. The SEC accused Terraform and Kwon of offering crypto assets without proper registration and misleading investors about their stability and investment potential.
The collapse of Terraform Labs in May 2022 triggered the latest crypto winter, causing a sharp fall in markets and affecting many crypto companies and investors.
Kwon and Terraform face significant fines as the SEC seeks nearly $5.3 billion in disgorgement, prejudgment interest and civil penalties. Meanwhile, Terraform Labs has offered to drop $1 million in fines from related entities, such as the Luna Foundation custodian, who were not specifically named in the SEC case.
The SEC proposed a ban on Quon's roles as an officer or director in any securities-issuing entity. The regulator asked Kwon for a full disclosure of his financial accounts and assets. In a separate filing, Kuhn contends that providing a list of his assets and accounts would violate his Fifth Amendment right against self-incrimination.
Kwon was arrested in March 2023 for falsifying travel documents while trying to leave Montenegro, and may face charges. He was later released on bail, and the US requested his extradition.
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