Overview of Terraform Labs Settlement
Terraform Labs, the company behind the failed TerraUSD and Luna cryptocurrencies, has reached a settlement with the U.S. Securities and Exchange Commission (SEC) to pay nearly $4.5 billion. This settlement comes after a lawsuit filed by the SEC against Terraform Labs and its former CEO, Do Kwon, for fraudulent activities.
Background of the Case
- In 2022, TerraUSD and Luna cryptocurrencies collapsed, resulting in approximately $40 billion in losses for crypto holders.
- The SEC accused Terraform Labs of misleading investors with promises of 20% annual returns through the Anchor Protocol, a decentralized finance app.
Details of the Settlement
The $4.5 billion settlement includes:
- Approximately $3.5 billion in disgorgement
- Over $460 million in prejudgment interest
- $420 million as a civil penalty
In addition to the financial penalties, former CEO Do Kwon will personally contribute over $200 million to the Terraform bankruptcy estate. Kwon is also prohibited from holding any officer or director positions in a public company.
The settlement terms were agreed upon by Terraform Labs and the SEC before a scheduled court hearing, with final approval expected by June 12. The aim of the consent judgment is to provide restitution to the investors affected by Terraform’s collapse and to deter future fraudulent activities in the crypto space.
The SEC highlighted that the imposed penalties are in line with legal limits and are intended to send a strong message to others engaging in similar fraudulent schemes. Following a trial earlier this year, Terraform Labs and Do Kwon were found guilty of defrauding investors.