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Terraform Labs and its founder, Do Kwon, have reached a tentative settlement with the U.S. Securities and Exchange Commission (SEC).
The SEC accused them of misleading cryptocurrency investors before the collapse of the stablecoin TerraUSD in 2022.
Do Kwon Agree to Settle SEC Civil Fraud Case
The settlement details remain undisclosed. In April, a jury found Kwon and Terraform Labs liable on civil fraud charges. The SEC alleged that in 2021, they misled investors about TerraUSD’s stability and falsely claimed Terraform’s blockchain was used in a popular Korean mobile payment app.
US District Judge Jed Rakoff in Manhattan has asked both parties to file papers supporting the settlement by June 12. Representatives from the SEC and the defendants declined to comment.
The collapse of TerraUSD and the related token Luna disrupted cryptocurrency markets in May 2022. Investors in the two cryptocurrencies lost more than $40 billion. The SEC asked Judge Rakoff to make Kwon and Terraform Labs relinquish $5.3 billion from stablecoin sales. Additionally, the SEC sought a $420 million fine for the company and a $100 million fine for Kwon. They also demanded a ban on dealing in “crypto asset securities.”
Read more: Top Crypto Bankruptcies: What You Need To Know
Kwon and Terraform Labs argued for significantly lower penalties, proposing maximum fines of $3.5 million for the company and less than $1 million for Kwon. Facing related criminal charges in both the US and South Korea, Kwon has denied any wrongdoing. Since his arrest in Montenegro in March 2023, he has awaited extradition, with Montenegrin authorities deliberating whether to send him to the US or South Korea.
The crypto community has mixed reactions to the settlement. Some question how Terraform Labs plans to return the money. The news has also influenced market movements: initially, LUNA gained over 22%, but it then plummeted, facing a 14% drop in the past 24 hours.
Read more: Terra (LUNA) Price Prediction 2024/2025/2030
The agreement between Terraform Labs, Do Kwon, and the SEC is a big deal for the cryptocurrency market. As legal issues continue, everyone in the industry is paying attention because the outcomes could set crucial precedents. Terraform Labs and its founder will finalize and submit the settlement terms by mid-June.