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Crypto firm Terraform to pay $4.5 billion SEC penalty
Photo: Police officers escort Do Kwon, co-founder of Terraform Labs, after he served a sentence for document forgery, in Podgorica, Montenegro, March 23, 2024. (Stevo Vasiljevic) (Reuters)
Crypto company Terraform Labs and its co-founder Do Kwon have agreed to pay $4.47 billion to settle a civil suit filed by the U.S. Securities and Exchange Commission, Bloomberg reports.
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The lawsuit follows the company’s collapse in 2022, which resulted in the loss of $40 billion in investor assets and had a significant impact on the world of cryptocurrencies. Following this news, Terraform’s LUNA token soared more than 10%, hovering around $0.58, according to CoinMarketCap.
Kwon, once considered a crypto king, was arrested in March 2023 for falsifying travel documents while trying to leave Montenegro, a country in southern Europe. He now awaits extradition to the United States or South Korea, where he could face possible charges.
The SEC has filed a complaint against Terraform and Kwon regarding the deceptive promotion and sale of crypto tokens, specifically the algorithmic stablecoin TerraUSD (UST).
The TerraUSD (UST) stablecoin was pegged to the Terra (LUNA) cryptocurrency, which meant that $1 UST was always worth $1 Luna USD. However, in May 2022, the value of LUNA dropped from over $120 per coin to near zero, resulting in a loss of over $50 billion in UST/LUNA market capitalization and triggering a crash that erased a value of 400 billion dollars of the broader crypto market.
The situation has worsened when FTX also collapsed in the same year.
The financial watchdog accused Terraform and its co-founder Kwon of offering crypto assets that were not properly registered and misleading investors about their investment potential and stability. The SEC required Kwon to disclose all of his accounts and financial assets.
In addition to Kwon, US authorities have cracked down on a number of individuals involved in crypto fraud this year, including Sam Bankman-Fried of FTXfounder of Binance Zhao ChangpengAnd “Bitcoin Jesus” Roger Ver.