Terraform Labs Fined $4.47 Billion by SEC

Following the settlement agreement between the U.S. Securities and Exchange Commission (SEC) and Terraform Labs regarding the collapse of its ecosystem, the latter has agreed to pay $4.47 billion.

On June 12, the regulator submitted a “proposed final consent judgment” for the judge’s approval.

“[The document] not only considers the scale of the fraud by imposing substantial remedial, punitive, and deterrent measures, including a multi-billion dollar payment, but also ensures meaningful and swift restitution for victimized investors who collectively lost billions when the defendants’ scheme collapsed,” the SEC stated.

The agreement includes a payment of $3.58 billion as compensation, $420 million as a civil penalty, and a ban on Terraform Labs co-founder Do Kwon from holding executive positions in public companies.

Kwon will also have to contribute his own $204 million towards the “company’s assets for distribution to affected investors,” the agency reported.

“If approved, the proposed judgment will send an unmistakable deterrent signal not only to those who commit brazen misconduct but also to anyone attempting to circumvent federal securities laws by developing new standards for crypto assets that collapse,” SEC representatives added.

On April 5, a jury in the Southern District of New York found Terraform Labs and Kwon guilty of defrauding investors and securities fraud. The trial lasted nine days and was conducted in absentia.

Initially, the regulator proposed a $5.3 billion penalty for the company and its head. In turn, defense attorneys suggested a “maximum possible” payment of $3.4 million.

In early March, the High Court of Podgorica approved the entrepreneur’s extradition to South Korean authorities. However, the prosecution objected, citing procedural violations. Subsequently, the process was cancelled.

In South Korea, Kwon faces numerous charges, including violations of capital market laws.

Earlier, it was reported that the co-founder of Terraform Labs was released from prison after serving his sentence for attempting to cross the border with forged documents.