Terraform Labs will have to pay $4.4 billion to settle fraud charges that caused $40 billion in losses when the TerraUSD and Luna tokens collapsed in 2022.
On June 12, the proposed final judgment with Terraform and founder Do Kwon was submitted to Manhattan federal court and will take effect when the judge in charge approves.
The proposal for Terraform includes $4.05 billion in fines, interest and a $420 million civil penalty.
However, the cryptocurrency startup filed for bankruptcy in January, so the fine demands will be included in the case of Terraform liquidating its assets.
Do Kwon was taken by police to court in Montenegro on March 24. Photo: Nikkei Asia
In addition to the $80 million civil fine against Do Kwon – founder, Terraform will have to pay a $4.55 billion judgment. Previously, Kwon was banned from trading cryptocurrencies and asked to transfer $204.3 million into the exchange’s bankruptcy assets.
According to court documents, the US Securities and Exchange Commission (SEC) stated that “this judgment is fair and reasonable”, to ensure maximum recovery of assets for damaged investors, as well as causing Terraform to stop working permanently. Terraform and Kwon agree with the above ruling.
The SEC accused Terraform and Kwon of misleading investors about the stability of TerraUSD, the cryptocurrency he designed to maintain a constant exchange rate with the US dollar. In addition, Kwon was also accused of falsely claiming that Terraform’s blockchain was being used in a popular mobile payment application in Korea.
Luna – a token also designed by Kwon, closely linked to TerraUSD, also collapsed in May 2022 when TerraUSD could not maintain a stable exchange rate with the USD.
Kwon did not attend the trial after being detained in Montenegro since March 2023, while the US and South Korea were seeking an extradition agreement to open criminal trials.
(Theo Nikkei Asia)