Kwon Do Hyung, the central figure in the Terra and Luna cryptocurrency crash, and his company Terraform Labs have agreed to pay the U.S. Securities and Exchange Commission (SEC) a fine and restitution totaling $4.47 billion. The settlement aims to compensate investors and permanently shut down Terraform Labs.
According to the court record of the Southern District Court of New York on June 12, the legal representatives of the SEC, Kwon, and Terraform Labs requested the court’s approval after reaching an agreement on the fine amount. This day is the deadline for submitting the agreement documents to the court.
The settlement includes provisions prohibiting Terraform Labs from trading cryptocurrency asset securities and Kwon from serving as an executive of a listed company.
The SEC stated, “With this settlement, we will be able to return maximum funds to the victims and permanently shut down Terraform Labs.”
However, the final settlement amount was lower than the original $5.26 billion set by the SEC.
In November 2021, the SEC filed a civil lawsuit against Kwon and Terraform Labs, accusing them of exaggerating Terra’s stability, deceiving investors, and causing significant investment losses.
The lawsuit proceeded in Kwon’s absence, as he was not required to appear in person.
In April, the jury found that “Terraform Labs and Kwon deceived investors into believing Terra was safe, causing them significant losses” and held them accountable for fraud charges.
The SEC then requested the court to impose a penalty and interest of $4.74 billion on Terraform Labs, a civil fine of $420 million, and a civil fine of $100 million on Kwon.
The SEC claimed the fine was a reasonable approximation, stating, “Kwon and Terraform Labs made over $4 billion in illegal profits.”
In response, Kwon and Terraform Labs argued that the issuance and sale of cryptocurrencies mostly took place outside the U.S., so the SEC had no basis for imposing fines.
However, the court sided with the SEC, ruling that Kwon and Terraform Labs’ actions also affected investors in the U.S.
Kwon, who fled the country at the end of April 2022, just before the crash of Terra and Luna coins, was arrested in Montenegro last March on passport forgery and has been in custody ever since.
In an interview in June 2022, he claimed that he had suffered significant financial losses due to the collapse of Terra and Luna, stating, “I invested almost all my assets in the Terra project.”
On May 5, the Supreme Court of Montenegro annulled Kwon’s decision to be deported to South Korea and sent the case back to the Podgorica High Court. Both South Korea and the U.S. have requested Kwon’s extradition.
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