US Court Approves the Settlement Between Terraform Labs and the SEC

The long and complex case of the US Securities and Exchange Commission’s (SEC) case against Terraform Labs and its former CEO, Do Kwon, has finally reached a conclusion with a $4.5 billion settlement. The settlement was signed off by the US District Court judge after the jury found the company and its CEO liable for organizing a years-long fraud involving crypto assets.

US Court Passes Judgment On Terraform Labs and Do Kwon

The Terra blockchain’s collapse shook the crypto world to its foundation back in May 2022, leading to massive consequences for the industry and thousands of investors who suffered heavy losses. Initially, Terraform Labs’ now-former CEO, Do Kwon, even went into hiding while he was pursued by the authorities of multiple countries around the world.

Now, over two years later, the case of Terraform Labs and Do Kwon has finally reached a conclusion — at least as far as the US authorities are concerned.

https://x.com/SECGov/status/1801643885820567887

Both the company and its former CEO have been found guilty by the jury, who held them liable for organizing a years-long fraud. But, the case was finally concluded when the US District Court judge signed off the $4.5 billion settlement with the SEC.

While the settlement comes with a hefty figure, this is still only a small amount compared to the damage that Do Kwon and his company have caused, given the $40 billion collapse of the company and its ecosystem.

The Consequences of Terraform’s Collapse

At the time of the collapse, Terra blockchain’s TerraUSD stablecoin was de-pegged from the US dollar, causing it to lose value rapidly. Other tokens operating alongside it in Terraform’s ecosystem also plummeted, with their value getting ever closer to zero.

As the SEC said, the incident caused devastating losses to countless investors. Not only that, but the collapse of the company and ecosystem had far-reaching consequences, affecting the crypto hedge fund Three Arrows Capital.

This was the start of a chain reaction, as the fall of Three Arrows eventually hit Genesis Global Capital and FTX, which collapsed in November 2023 — only six months after Terraform Labs.

In short, it was a catastrophic chain of events for the crypto industry and countless sector participants, causing damages that will likely never be repaid in full. The SEC’s Chair, Gary Gensler, commented: “Terraform and Do Kwon’s fraudulent activities caused devastating losses for investors, in some cases wiping out entire life savings. Their fraud serves as a reminder that, when firms fail to comply with the law, investors get hurt.”

Still, now that the judgment was passed — and both Terraform and Do Kwon consented to it — the matter will finally be put to rest. Meanwhile, the firm is required to pay $4.05 billion of disgorgement, plus interest, as well as another $420 million civil fine.

As for Do Kwon, he faces an $80 million civil penalty, coupled with $124 million in disgorgement, plus interest. Of course, since Terraform filed for bankruptcy in January, the amount will likely never be paid.