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Terraform Labs and co-founder Do Kwon to pay $4.5 billion in historic settlement over crypto fraud

In May 2022, Terraform Lab's stablecoin was at an all-time high.
UPDATED JUN 22, 2024
Cover Image Source: Police officers escort Do Kwon | Getty Images |  Filip Filipovic
Cover Image Source: Police officers escort Do Kwon | Getty Images | Filip Filipovic

The Terraform Labs PTE, Ltd. and its co-founder Do Kwon have agreed to pay more than $4.5 billion following a unanimous jury verdict that held them responsible for a lengthy fraud that went on for years and involved crypto asset securities that led to massive investor losses, via CNBC.

In May 2022, Terraform Lab's stablecoin was at an all-time high. At the time, the US pegged stablecoin was collectively worth tens of billions of dollars, and like Bankman-Fried, Kwon had landed a spot on the prestigious Forbes 30 under 30 list. 

 Filip Filipovic | Getty Images
Photo credit: Filip Filipovic | Getty Images

In just one month, the stablecoin came crashing down. While most stablecoins are backed up with a mix of cash and other assets to match the token value, Kwon's ingestion was backed by a complex set of code. This failed in May 2022 which cost the investors $40 billion in market value overnight.

The US criminal, civil as well as bankruptcy courts made efforts to mitigate the issue. Now, a judge signed off on Do Kwon as well as his bankrupt Terraform Labs settling with the U.S. Securities and Exchange Commission for $4.5 billion.

digital cryptocurrency Bitcoin | Chesnot | Getty Images
Photo credit: Bitcoin | Chesnot | Getty Images

As per the court, Do Kwon and his company, which remains in bankruptcy, has around $150 million in assets. It remains unclear how they will be able to pay the fine. 

This comes after Binance Founder and ex-CEO were sentenced to four months in prison after settling with the U.S Justice Department, Commodity Futures Trading Commission, and the Treasury Department for $4.3 billion in November. The FTX founder and ex-CEO was sentenced to 25 years in prison.

The crypto world has been in turmoil ever since. The downfall of the crypto's previous class of tycoons comes as the digital asset market matures and gains with the backing of Wall Street's tycoons. Having said that the tokens are still enjoying a bull run with the OG Bitcoin reaching a new all-time high above $73,000 in March.



 

The crime for which he faces trial goes back to the fall of TerraUSD(UST) as well as the sister token Luna, which was named after Kwon's daughter. Kwon is said to have the gift of gab and was often successful at convincing others to buy what he had to sell. 

As per reports, Kwon is living in a legal and social purgatory in the Balkan. The 32-year-old fugitive was finally caught after he was on the run for months, making pit stops in Dubai, Serbia, and Montenegro.

He is been there since March last year, following a failed attempt to flee from Podgorica to Dubai on a jet with a fake passport. Do Kwon is out on bail but bound to the Balkan state, until the country's Supreme Court decides whether to send him back home to South Korea to face trial or to the United States.

"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," said SEC Chair Gary Gensler in a press release.

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