KEY POINTS
- Kwon and Terraform will be permanently banned from buying and selling crypto securities
- The former crypto darling also has to pay "no less than" $204.3 million under the settlement agreement
- Lawyers said the settlement should send a message to the industry that Kwon's "brazen" violations won't be tolerated
Cryptocurrency firm Terraform Labs and its founder Do Kwon have agreed to pay a staggering multi-billion dollar fine to settle a fraud case filed by the U.S. Securities and Exchange Commission (SEC) in relation to wipeout of billions from the crypto market when the Terra-Luna stablecoin empire collapsed in 2022.
In court documents filed Wednesday, it was revealed that Terraform and Kwon (Do Heyong Kwon) agreed to pay the multi-billion-dollar fine in disgorgement and civil penalties.
"A jury found Kwon and Terraform liable for intentionally and recklessly orchestrating one of the largest securities frauds in U.S. history. The proposed consent judgment both addresses the magnitude of this fraud by imposing significant remedial, punitive, and deterrent remedies, including a multi-billion dollar judgment against Defendants, and provides for meaningful and speedy recovery for investor victims that collectively lost billions when Defendants' scheme collapsed," the court filing stated.
The filing further noted that Terraform and Kwon made their crypto assets appear more successful by claiming that prominent Korean payment app Chai was using the Terra blockchain for payments processing.
Kwon has to pay "no less than $204,320,196" from his own pocket under the settlement agreement. He also agreed to transfer assets to the Terraform bankruptcy estate "to be distributed to harmed investors pursuant to a Chapter 11 plan."
As per the settlement agreement, Kwon and Terraform Labs will be permanently banned from buying and selling digital asset securities, including all of the tokens within the defunct Terra ecosystem.
Terraform's current CEO, Chris Amani, has agreed to the settlement terms, but the agreement has yet to be approved by the New York judge who has oversight of the case before the terms are implemented.
Prosecution lawyers said in Wednesday's filing that the settlement "sends a clear message that the sort of brazen misconduct and flouting of the federal securities laws that took place here [in the Terraform case] will not be tolerated."
News of the settlement agreement came a few weeks after a Montenegro appeals court reversed an order to have Kwon extradited to his home country in South Korea. The Montenegrin court has yet to decide on the U.S. request to extradite the former crypto tycoon.
Both South Korea and the U.S. have been hard at work for months to extradite the former crypto mogul. Kwon's business partner, identified only by his initials, was deported by Montenegro to South Korea in February.
Terraform filed for bankruptcy in January in a bid to navigate its legal battles. At the time, it said it intends to pay off its financial obligations to vendors and employees.
