US District Judge approves $4.5B settlement between Terraform Labs, Do Kwon, and SEC, involving significant fines and industry ban.
The $44.5 billion settlement between the US Securities and Exchange Commission (SEC), Terraform Labs, and Do Kwon was ultimately approved by the US District Judge on Thursday, June 13.
The agreement will essentially result in Do Kwon and Terra paying billions in fines and penalties to the SEC, while also prohibiting them from participating in the crypto industry.
Terraform Labs will be required to pay a total of $3.6 billion in disgorgement, a civil penalty of $420 million, and approximately $467 million in prejudgement interest, by the terms of the agreement.
In addition to Terraform Labs, Do Kwon has consented to pay a total of $110 million in disgorgement, $80 million in civil penalties, and $14.3 million in prejudgment interest. SEC chair Gary Gensler issued a statement on Thursday that read:
“This case affirms what court after court has said: The economic realities of a product — not the labels, the spin, or the hype — determine whether it is a security under the securities laws. Terraform and Do Kwon’s fraudulent activities caused devastating losses for investors, in some cases wiping out entire life savings. Their fraud serves as a reminder that, when firms fail to comply with the law, investors get hurt.”
CEO Ki Young Ju of CryptoQuant criticized the US government’s approach to financial crimes, asserting that it would be impossible to obtain $4.5 billion from Do Kwon without him perpetrating a financial crime.
Ju observed that government settlements frequently prioritize financial advantages over the enforcement of the law, which, in his opinion, is indicative of a dysfunctional American judicial system.
Ju underscored that the United States, despite its role as a global enforcer, seizes criminal proceeds without compensating international victims. He also observed that Do Kwon, who is a Korean national, is implicated in the controversy.
David Hoffman, a prominent figure associated with Bankless, conveyed profound apprehensions about the possibility of Terraform Labs being required to pay a $4.5 billion fine to the SEC.
Hoffman conjectured that if Terraform Labs possesses $4.5 billion in assets and this sum is paid exclusively as a fine to the SEC rather than compensating users who experienced financial losses, it would be a remarkable illustration of agency corruption in recent history.
