Terraform Labs Settles SEC Charges for $4.47B

One of the biggest collapses in the history of cryptocurrency is finally ending, and Terraform Labs is willing to pay the SEC $4.47 billion.

Cryptocurrency platform Terraform Labs has agreed to pay the Securities and Exchanges Commission (SEC) $4.47 billion to settle charges that it misled investors about a digital asset securities fraud.

The SEC on Friday asked a federal judge in the Southern District of New York to accept the settlement, which comes two months after a judge found Terraform and its co-founder Do Kwon liable for securities fraud in a bench trial.

Terraform will pay the SEC $3.5 billion-plus interest, apart from a $420 million penalty. Kwon will pay $204.3 million in disgorgement, interest and penalty.

The SEC alleges that Terraform misled investors about the peg of its algorithmic stablecoin to the U.S. dollar, and that Kwon orchestrated a scheme to manipulate the price of Terraform’s crypto assets, among other allegations.

The charges stem from the collapse of the Terra ecosystem in May 2022, which saw LUNA, the Terra blockchain's token, lose almost 50% of its value in a single day. The collapse wiped out billions of dollars in crypto assets.

Terraform introduced LUNA, its native token, and UST, an algorithmic stablecoin that was meant to be pegged to the U.S. dollar. Both tokens were created and sold by Terraform, and LUNA was used to mint UST.

The multibillion-dollar settlement between Terraform and the SEC has raised questions about whether Terraform has the ability to pay off the debt.

The new agreement comes after a federal judge in January ordered Terraform to pay more than $4.4 billion in penalties for securities fraud. The penalties were levied after the SEC alleged that Terraform misled investors about a digital asset securities fraud.

The SEC alleged that Terraform and Kwon misled investors about the peg of UST to the U.S. dollar and that Kwon orchestrated a scheme to manipulate the price of Terraform’s crypto assets.

The SEC also alleged that Terraform and Kwon made materially false and misleading statements about LUNA and UST in offering documents and public statements, and that Kwon orchestrated a scheme to manipulate the price of Terraform’s crypto assets, among other allegations.

The charges stem from the collapse of the Terra ecosystem in May 2022, which saw LUNA lose almost 50% of its value in a single day. The collapse wiped out billions of dollars in crypto assets.