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Do Kwon, Terraform Settle with SEC: Final Terms Awaited

Highlights:

  • Terraform Labs and CEO Do Kwon agree to settle with the SEC on fraud charges.
  • Settlement terms to be finalized and submitted for approval by June 12, 2024.
  • Do Kwon faces separate criminal charges in the US and South Korea.

Singapore-based Terraform Labs and its CEO, Do Kwon, have entered a tentative settlement with the U.S. Securities and Exchange Commission (SEC). This move comes after a jury in April found them liable for civil fraud related to misleading cryptocurrency investors in 2021. 

The SEC’s allegations focused on Terraform’s claims regarding the stability of TerraUSD, an algorithmic stablecoin pegged at $1, which dramatically collapsed in May 2022.

Settlement Details Emerge

The proceedings reached a pivotal moment on Wednesday during a non-recorded telephone conference. Judge Jed Rakoff of Manhattan’s district court was informed of the settlement agreement. 

Initially scheduled for an oral argument on May 29, this session was canceled as the parties moved towards finalizing their agreement. The parties must file documents supporting the settlement by June 12, 2024, signaling a near conclusion to this high-profile case.

Do Kwon, currently out on bail in Montenegro, is navigating legal complexities. He faces extradition to either the U.S. or South Korea and charges of falsifying travel documents in Montenegro. This legal entanglement highlights the international repercussions of the Terra ecosystem’s collapse.

Financial Repercussions and Future Commitments

As part of the settlement, significant financial implications are on the table. The SEC initially proposed a staggering $5.3 billion penalty, reflecting the severity of the case. In contrast, Terraform Labs suggested a notably lower figure, $1 million, arguing against extensive disgorgements that would involve entities not directly named in the lawsuit. This discrepancy points to ongoing negotiations that will likely shape the final contours of the agreement.

Furthermore, the SEC’s resolution includes potential restrictions on Kwon’s future involvement in securities-issuing entities, demanding full transparency concerning his financial dealings. Kwon’s response to these demands cites constitutional grounds, arguing that such disclosures would infringe upon his rights against self-incrimination.

The legal saga of Terraform Labs and Do Kwon is a significant chapter in the broader narrative of cryptocurrency regulation. As the SEC tightens its oversight, cryptocurrency firms must navigate an increasingly complex legal landscape. 

The final settlement terms, expected by mid-June, will conclude this chapter for Terraform and Kwon and set precedents for future regulatory actions in the crypto space.

Disclaimer: Cryptocurrency is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.