Terraform Labs and its former CEO, Do Kwon, have agreed to pay about $4.5 billion in recovery and civil penalties to the Securities and Exchange Commission (SEC), thus striking a settlement agreement with the US regulator, according to a court filing yesterday (Wednesday).
Furthermore, Kwon and Terraform Labs would be permanently banned from buying and selling crypto asset securities, including the tokens in the Terra ecosystem.
Another Major Settlement
However, the settlement deal has yet to be approved by US District Court Judge Jed Rakoff of the Southern District of New York (SDNY), who is overseeing the case. The lawyers of the SEC have already filed a letter with the judge for approval.
“If approved, the proposed judgment will send an unmistakable deterrent message to not only those who engage in brazen misconduct but also to all those who seek to evade the requirements of the federal securities laws by crafting new standards of behavior for crypto assets that fall under the purview of the federal securities laws,” the regulatory lawyers wrote.
Out of the total agreed settlement amount of $4,473,828,306, Kwon personally will have to pay at least $204,320,196.
Initially, the US regulator was seeking $5.3 billion in settlement. However, the legal representatives of the defendants countered that with only $1 million in civil penalties and no recovery or injunction.
Kwon’s Fate Hangs in a Balance
Kwon was known for building Terraform Labs. However, the project's two cryptocurrencies, TerraUSD and Luna, collapsed in 2022, wiping out about $37 billion in value. The collapse of the algorithmic stablecoin triggered the shuttering and collapse of several other cryptocurrency companies.
After his company collapsed, he disappeared immediately from public sight but was arrested in Montenegro last year while traveling with fake travel documents. Both South Korea and the United States have been trying to extradite him. Meanwhile, he was released from the Montenegro prison on bail due to some technical issues in the extradition ruling against him.
The SEC formally charged Kwon and his company with fraud in April of last year. The trial against Kwon in the US proceeded in his absence.
This article was written by Arnab Shome at www.financemagnates.com.
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