Do Kwon Settles with SEC for $4.5 Billion in Terra Fraud Case
Do Kwon, the founder of Terraform Labs, has reached a settlement with the U.S. Securities and Exchange Commission (SEC). The company will pay a $4.5 billion penalty, including restitution and civil penalties, following accusations of one of the largest securities frauds in U.S. history. Kwon, currently under restricted movement in Montenegro, awaits extradition to either South Korea or the United States.
The SEC's lawsuit, filed in February, alleged that Kwon and Terraform Labs defrauded investors through the sale of TerraUSD (UST) and Luna. The penalty, totaling $4.5 billion, includes $3.5 billion in restitution and over $460 million in interest. Despite the company's remaining assets of only $150 million, Terraform Labs will cover the remaining portion of the penalty. Kwon is personally responsible for paying approximately $200 million.
Kwon's arrest in Montenegro comes after the collapse of Terra (LUNA) and its stablecoin UST in 2022, which wiped out around $40 billion in value and triggered the failure of the FTX exchange. The SEC's penalty exceeds the available assets, ensuring that American investors, as creditors, receive at least what can be taken. Kwon and Terraform Labs are barred from buying or selling cryptocurrencies and tokens, including those part of the Terra ecosystem or its remnants.
Do Kwon's agreement to pay a $4.5 billion penalty to the SEC brings a significant step towards justice for the investors affected by the collapse of Terra (LUNA) and UST. With Kwon's personal responsibility and Terraform Labs' remaining assets covering the penalty, the U.S. government aims to recover funds for American investors. Kwon's extradition to either South Korea or the United States is pending.
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