Crypto company Terraform Labs and its co-founder Do Kwon have agreed to pay $4.47 billion to settle a civil lawsuit filed by the US Securities and Exchange Commission, Bloomberg reports.
The lawsuit followed the firm’s collapse in 2022, which resulted in the loss of $40 billion in investor assets and had a significant impact on the cryptocurrency world. Following the news, Terraform’s LUNA token climbed over 10%, hovering around $0.58, according to CoinMarketCap.
Kwon, once considered a crypto king, was arrested in March 2023 for forging travel documents while attempting to leave a southern European country Montenegro. Now, he is awaiting extradition to the U.S. or South Korea, where he will face potential charges.
The SEC filed a case against Terraform and Kwon regarding the deceptive promotion and sale of crypto tokens, particularly the algorithmic stablecoin TerraUSD (UST).
The TerraUSD (UST) stablecoin was tied to the cryptocurrency Terra (LUNA), which meant that $1 UST was always worth $1 USD of Luna. However, in May 2022, the value of LUNA plummeted from over $120 per coin to nearly zero, resulting in a loss of over $50 billion in UST/LUNA market capitalization and triggering a crash that wiped $400 billion in value from the wider crypto market.
The situation 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 demanded that Kwon disclose all of his financial accounts and assets.
In addition to Kwon, U.S. authorities have cracked down on a number of individuals involved in crypto fraud this year, including FTX’s Sam Bankman-Fried, Binance founder Changpeng Zhao, and “Bitcoin Jesus” Roger Ver.
