Bankrupt Terraform Labs And Founder Do Kwon Reach Historic $4.47B Settlement With The SEC In The UST, LUNA Collapse Case

In a significant development, Terraform Labs agreed to a civil settlement of $4.47 Billion with the Securities and Exchange Commission after being found guilty of defrauding cryptocurrency investors during the infamous Terra LUNA/USD implosion in 2022.

What Happened: A jury found Terraform Labs and its disgraced founder, Do Kwon, guilty of defrauding cryptocurrency investors, according to a Reuters report Wednesday. A proposed final judgment was filed in a Manhattan federal court, awaiting approval by U.S. District Judge Jed Rakoff.

The judgment includes $4.05 billion of disgorgement plus interest, and a $420 million civil fine. However, due to Terraform’s bankruptcy filing in January, much of this is unlikely to be paid and will be treated as an unsecured claim in the Chapter 11 case.

Kwon has agreed to a ban on cryptocurrency transactions and is required to transfer $204.3 million to Terraform’s bankruptcy estate. The SEC stated in a court filing that the judgment would “ensure the maximal return of funds to harmed investors and put Terraform out of business for good.”

Why It Matters: The case against Terraform Labs and Do Kwon has been ongoing for over two years. In April 2024, a United States District Court found that Terraform Labs and Kwon had defrauded investors during the stunning collapse of stablecoin TerraUSD UST/USD and reserve cryptocurrency LUNA, an event that wiped out more than $40 billion in market cap within a week and triggered a cryptocurrency bear market.

In the same month, a former employee of Jump Trading testified that Jump Trading had colluded with Terraform Labs to manipulate the price of UST.

Price Action: At the time of writing, LUNA was exchanging hands at $0.5476, up 0.34% in the last 24 hours, according to data from Benzinga Pro. Its sister token, Terra Classic LUNC/USD rose 2.23% in the last 24 hours.

Photo via Shutterstock

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.