US judge approves Terraform’s $4.5B settlement with SEC
A US District Court judge has signed off on a $4.5 billion settlement between Terraform Labs, co-founder Do Kwon and the Securities and Exchange Commission.
New York District Court Judge Jed Rakoff approved the settlement on June 13.
Under the agreement, Terraform will pay approximately $3.6 billion in disgorgement, a $420 million civil penalty and approximately $467 million in prejudgment interest.
Together with Terraform, Kuhn agreed to pay $110 million in disgorgement and $14.3 million in prejudgment interest — along with an $80 million civil penalty.
The Terraform crypto ecosystem will crash in May 2022 if the algorithmic stablecoin TerraUSD (UST) – now TerraClassicUSD (USTC) – loses its peg to the US dollar.
Deepeg has sparked a death knell for the network's Terra Classic (LUNC) token, which was intended to stabilize the coin's price.
In February 2023, the SEC charged Terraform and Quon with securities law violations and fraud.
“This case confirms what court after court has said: the economic facts of a product — not its labels, spins or incentives — determine whether it is a security under the securities laws,” SEC Chairman Gary Gensler said in a June 13 statement.
He added: “Terraform and Do Kwon's fraudulent practices have caused investors heavy losses, sometimes wiping out their entire life savings.” “Their fraud serves as a reminder that investors suffer when companies fail to comply with the law.”
Related: Terraform Labs to End Operations, Terra Community to Take Over
In the year In 2022, the stablecoin Deepeg wiped $45 billion off the Terra blockchain in a matter of days. The incident sparked widespread panic in the crypto market, causing many tokens to plummet in value.
Terraform Labs filed for bankruptcy in January, and it's not clear how it will find the money to repay it, as it reported $450.9 million in debt and $430.1 million in assets.
Meanwhile, Khun is currently in prison in Montenegro after being jailed for four months in March last year for using fake passports to leave the country.
He has been released pending a decision by the country's courts on extradition requests from the United States and his native South Korea.
Kwon's legal team successfully appealed his extradition last month, with Montenegro's highest court set to decide whether he should be extradited.
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Update (June 13, 11:45 p.m. UTC): This article has been updated to add information throughout.
