Terraform Labs and Do Kwon Reach Settlement in SEC Case
Terraform Labs and Do Kwon have reportedly come to an agreement to settle their case with the United States Securities and Exchange Commission (SEC), according to new court documents revealed on Thursday.
The scheduled oral argument between Do Kwon, Terraform Labs, and the SEC, which was set for May 29, was canceled as the parties informed the Court that they had reached a settlement in principle, as stated in court records.
Both parties have until June 12 to submit the necessary documents to finalize the agreement effectively.
Initially, the SEC proposed a significant $5.3 billion fine against Kwon and his cryptocurrency company, Terraform Labs. However, Kwon contested the hefty fine last month and requested a maximum penalty of $1 million.
Similarly, the federal regulator requested that Kwon be prohibited from acting as a securities officer and director of any securities issuer. They also demanded that the disgraced former CEO hand over his personal accounts. Kwon’s lawyers argued that complying with these requirements would violate their client’s 5th amendment rights and potentially incriminate him.
The news of the settlement comes just one month after Kwon was found liable for causing a $40 billion decline in cryptocurrency markets due to the collapse of his algorithmic stablecoins, Terra and Luna, in May 2022.
In a statement made in February 2023, SEC Chair Gary Gensler said, “We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD. We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”
Following the announcement of the settlement, the price of Terra dramatically increased by over 16.5%.
Meanwhile, Kwon is currently being held in Montenegro as both the U.S. and South Korea seek his extradition. He was initially arrested in the Balkan country in March 2023 for falsifying travel documents as he attempted to flee Montenegro after a months-long search that spanned parts of Europe and Asia.
Earlier this month, Montenegro’s Appellate Court suspended his potential extradition following an appeal from his lawyers. The decision will now be reviewed by the country’s High Court.
If approved, the settlement will mark the end of a dramatic legal saga between the federal regulator and Kwon and his company. The details of the agreement are yet to be disclosed to the public.
