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Crypto firm Terraform will pay a $4.5 billion fine to the SEC
Photo: Police officers escort Do Kwon, co-founder of Terraform Labs, after he served a sentence for falsifying documents, in Podgorica, Montenegro, March 23, 2024. (Stevo Vasiljevic) (Reuters)
Cryptography firm Terraform Labs and its co-founder Do Kwon have agreed to pay US$4.47 billion to resolve a civil lawsuit filed by the U.S. Securities and Exchange Commission, Bloomberg reports.
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The lawsuit followed the company’s collapse in 2022, which resulted in the loss of $40 billion in investor assets and had a significant impact on the world of cryptocurrencies. Following the news, Terraform’s LUNA token rose more than 10%, hovering around $0.58, according to CoinMarketCap.
Kwon, once considered a crypto king, was arrested in March 2023 for forging travel documents while trying to leave Montenegro, a southern European country. He is now awaiting extradition to the US or South Korea, where he will face possible charges.
The SEC has filed a lawsuit against Terraform and Kwon over the deceptive promotion and sale of cryptographic tokens, particularly the algorithmic stablecoin TerraUSD (UST).
The stablecoin TerraUSD (UST) was pegged to the cryptocurrency Terra (LUNA), which meant that $1 UST was always worth $1 USD worth 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 the UST/LUNA market capitalization and triggering a crash that eliminated $400 billion in value of the broader crypto market.
The situation got worse 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 required Kwon to disclose all of his financial accounts and assets.
In addition to Kwon, US authorities have cracked down on several individuals involved in crypto fraud this year, including FTX’s Sam Bankman-FriedFounder of Binance Changpeng ZhaoIt is “Bitcoin Jesus” Roger Ver.