Terraform Labs Agrees To Pay $4.47 Billion Fine With SEC

Terraform Labs has reached a settlement in its lawsuit with the Securities and Exchange Commission (SEC), with the defunct crypto firm agreeing to pay a $4.47 billion fine for its fraudulent activity related to the defunct Terra blockchain.

• In a Wednesday letter to US District Judge Jed Rakoff, the SEC asked for approval of its “proposed final consent judgement” concerning Terraform and its famous co-founder, Do Kwon.
• The agency claimed that the seismic penalty addresses the “magnitude of this fraud” while allowing for “meaningful and speedy recovery” of the billions of dollars lost by the network’s investors.
• “To settle this action, Terraform agrees to provide the SEC with all the relief it sought from the Court,” the letter stated. That includes $3.6 billion in disgorgement, $466 million in prejudgment interest, and a $420 million civil penalty – nearly matching what the SEC had requested in April.
• Kwon himself has agreed to pay nearly all penalties the SEC requested, including $204 million in monetary relief that will go entirely to the Terraform Labs bankruptcy estate to aid harmed investors.
• The SEC charged Terraform and Kwon with securities fraud in 2023 related to the fallen Terra blockchain, whose unstable design resulted in a spectacular $44 billion blowup across its LUNA and UST tokens.
• In early April, a jury found Terraform and Kwon guilty of misleading investors and of deliberate fraud.

• “The entry of this judgment would ensure the maximal return of funds to harmed investors and put Terraform out of business for good,” the SEC concluded.

• If accepted, this would mark the largest settlement in a crypto fraud case to date, outsizing even Binance’s $4.3 billion settlement with the Justice Department in November.
• Still, some are skeptical that Terraform or Kwon actually have the money to pay the charges.

• “$4.47B cash-out is impossible, even with a $40B market ca,” wrote CryptoQuant CEO Ki Young Ju on the matter. “Do and Terraform aren’t supposed to hold that much money.”