- Terraform Labs will pay $4.47 billion in penalties to the SEC.
- Founder Do Kwon will pay about another $204 million.
- The SEC submitted the resolution for the approval of a federal judge Wednesday.
Terraform Labs, the entity behind the stablecoin TerraUSD, will pay the Securities and Exchange Commission $4.47 billion in penalties to resolve a civil lawsuit, according to a settlement announced Wednesday.
Do Kwon, founder of Terraform Labs and the target of ongoing criminal litigation from the Justice Department, will pay another $204 million to the SEC.
The final judgement is still pending a federal judge’s approval.
The agreement follows a jury’s verdict in April that found Terraform and Kwon liable for fraud. Kwon is also facing criminal litigation in the US and is awaiting extradition in Montenegro.
TerraUSD’s collapse
In early 2022, Kwon was one of the most influential figures in crypto.
His so-called algorithmic stablecoin, TerraUSD, had a market capitalisation of nearly $19 billion, per CoinGecko.
And Luna, the token that backed TerraUSD, was trading at about $116 with a market cap of almost $40 billion.
In May 2022, however, Kwon’s crypto empire suddenly collapsed. TerraUSD depegged from the dollar, and Luna’s price plummeted.
Kwon faced accusations of fraud, and in September 2022, a South Korean court issued a warrant for his arrest. Kwon’s whereabouts were unknown at the time, and a global search for him ensued. He eventually surfaced in Montenegro.
In February 2023, US regulators weighed in as the SEC sued Kwon and Terraform Labs.
“We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD,” SEC Chair Gary Gensler said in a statement at the time
And, in March 2023, the Justice Department filed criminal charges against Kwon. He was detained in Montenegro after he attempted to use a false passport to escape to Dubai.
Extradition battles
Since his detainment in Montenegro, Kwon has been caught in an extradition battle between the US and South Korea, where he is a citizen.
US officials first requested Kwon’s extradition in March 2023, shortly after the Justice Department charged him.
Kwon, however, was sentenced to four months in prison in Montenegro after he was found using a fake Costa Rican passport at the airport in Podgorica, the capital of Montenegro.
He was released from prison on bail in March, and as of late April, it looked like he was headed to South Korea.
However, after his lawyers filed yet another appeal, Kwon is still awaiting extradition.
Update, June 12: The story was updated to provide background on Terraform Labs and Do Kwon.
