Terraform Labs and Founder Do Kwon Agree to Pay $4.67 Billion in SEC Settlement Amid Ongoing Legal Battles

Terraform Labs and Founder Do Kwon Agree to Pay $4.67 Billion in SEC Settlement Amid Ongoing Legal Battles

Terraform Labs, the company behind the stablecoin TerraUSD, has agreed to pay the Securities and Exchange Commission (SEC) $4.47 billion in penalties to settle a civil lawsuit, according to a settlement announced on Wednesday. Do Kwon, the founder of Terraform Labs who is also the subject of ongoing criminal litigation by the Justice Department, will personally pay an additional $204 million to the SEC. This settlement is pending final approval from a federal judge.

The agreement comes after an April jury verdict that found Terraform Labs and Kwon liable for fraud. Kwon is also facing criminal charges in the United States and is currently awaiting extradition in Montenegro.

The Collapse of TerraUSD

In early 2022, Do Kwon was a prominent figure in the cryptocurrency world. TerraUSD, his algorithmic stablecoin, had a market capitalization approaching $19 billion according to CoinGecko, while Luna, the token supporting TerraUSD, was trading at approximately $116 with a market cap nearing $40 billion. However, in May 2022, Kwon’s crypto empire dramatically collapsed when TerraUSD lost its dollar peg and Luna’s value plummeted.

Following the collapse, Kwon faced multiple fraud accusations. In September 2022, a South Korean court issued a warrant for his arrest, and a global manhunt ensued as his whereabouts were initially unknown. Kwon was eventually located in Montenegro.

Legal Actions and Extradition

In February 2023, U.S. regulators stepped in, with the SEC suing Kwon and Terraform Labs. SEC Chair Gary Gensler stated at the time, “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 TerraUSD.”

The Justice Department followed in March 2023, filing criminal charges against Kwon. He was detained in Montenegro after attempting to flee to Dubai using a false passport.

Since his arrest in Montenegro, Kwon has been at the center of an extradition tug-of-war between the United States and South Korea. The U.S. requested his extradition in March 2023, shortly after the Justice Department’s charges.

However, Kwon was sentenced to four months in a Montenegrin prison for using a fake Costa Rican passport at the airport in Podgorica, Montenegro’s capital. He was released on bail in March, and as of late April, it appeared he might be extradited to South Korea. Nevertheless, a subsequent appeal by his lawyers has left his extradition status in limbo.