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Home » Terraform Labs and Do Kwon Agree to $4.5 Billion SEC Settlement

Terraform Labs and Do Kwon Agree to $4.5 Billion SEC Settlement

Hania by Hania
June 13, 2024
in Altcoin News
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Terraform Labs and Do Kwon Agree to $4.5 Billion SEC Settlement
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Terraform Labs and its co-founder Do Kwon have reached a significant settlement with the U.S. Securities and Exchange Commission (SEC), agreeing to pay $4.5 billion to resolve allegations of investor fraud related to their TerraUSD (UST) stablecoin and Luna token.

Background of the Case

In May 2022, the SEC launched a civil lawsuit against Terraform Labs and Do Kwon, accusing them of defrauding investors by misrepresenting the stability and security of their UST stablecoin and Luna token. Initially, the SEC sought a total of $5.3 billion, which included disgorgement, prejudgment interest, and civil penalties. The allegations came after a dramatic collapse of the Terra ecosystem, which caused substantial financial losses and shook the cryptocurrency market.

Terraform Labs and Do Kwon Agree to $4.5 Billion SEC Settlement

The Collapse of Terra Ecosystem

The downfall of Terra’s ecosystem began when UST, an algorithmic stablecoin designed to maintain parity with the US dollar, lost its peg. This devaluation set off a chain reaction, drastically reducing the value of Luna, Terra’s utility token, to nearly zero. The collapse wiped out billions of dollars, severely impacting investors and triggering a prolonged downturn in the broader cryptocurrency market.

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Also Read: The Fall Of UST LUNA: Crypto’s Greatest Crash!

Settlement Details and Future Implications

Under the settlement, Terraform Labs will pay $4.05 billion, covering disgorgement, prejudgment interest, and a civil penalty. Do Kwon, on the other hand, will personally pay an $80 million civil penalty. Furthermore, both Terraform Labs and Do Kwon are permanently banned from participating in the offering or sale of crypto asset securities.

The settlement’s approval is pending judicial review. Terraform Labs’ recent bankruptcy filing in January 2024 has raised questions about their capacity to meet the financial terms of the settlement. Meanwhile, Do Kwon is also facing separate criminal charges related to the Terra collapse and is awaiting extradition from Montenegro.

 
Tags: crypto newsTerra (LUNA)
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Hania

Hania

Hania is a 30-year-old blogger who used to be a teacher before entering the world of writing. She is originally from India and has been writing blogs on various topics for 2 years now. Hania is particularly interested in exploring the intersections of finance, technology, and cryptocurrency. Her experience as a teacher has given her unique insights into the ways in which digital media can be used to facilitate learning and engagement. Through her writing, Hania hopes to share her knowledge and learning of crypto industry with everyone.

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