As a crypto investor who has experienced my fair share of losses in the volatile world of digital assets, I cannot help but feel a mix of emotions reading about this latest development with Terraform Labs and the SEC. The magnitude of the fraud and the resulting financial damage to investors is truly astounding.
Terraform Labs, the now-defunct cryptocurrency company, has come to an agreement with the Securities and Exchange Commission (SEC) in their lawsuit. The settlement requires Terraform Labs to pay a penalty of $4.47 billion for engaging in fraudulent practices connected to the defunct Terra blockchain.
- In a Wednesday letter to US District Judge Jed Rakoff, the SEC asked for approval of its “proposed final consent judgement” concerning Terraform and its famous co-founder, Do Kwon.
- The agency claimed that the seismic penalty addresses the “magnitude of this fraud” while allowing for “meaningful and speedy recovery” of the billions of dollars lost by the network’s investors.
- “To settle this action, Terraform agrees to provide the SEC with all the relief it sought from the Court,” the letter stated. That includes $3.6 billion in disgorgement, $466 million in prejudgment interest, and a $420 million civil penalty – nearly matching what the SEC had requested in April.
- Kwon himself has agreed to pay nearly all penalties the SEC requested, including $204 million in monetary relief that will go entirely to the Terraform Labs bankruptcy estate to aid harmed investors.
- The SEC charged Terraform and Kwon with securities fraud in 2023 related to the fallen Terra blockchain, whose unstable design resulted in a spectacular $44 billion blowup across its LUNA and UST tokens.
- In early April, a jury found Terraform and Kwon guilty of misleading investors and of deliberate fraud.
“To maximize the recovery of funds for affected investors, it is recommended that this ruling be implemented. This decision would ultimately lead to the closure of Terraform’s operations permanently.”
- If accepted, this would mark the largest settlement in a crypto fraud case to date, outsizing even Binance’s $4.3 billion settlement with the Justice Department in November.
- Still, some are skeptical that Terraform or Kwon actually have the money to pay the charges.
As a crypto investor, I would rephrase Ki Young Ju’s statement as follows: “It’s implausible for $4.47 billion in cash-outs to occur, given a market cap of only $40 billion. Do Kwon and Terraform Labs don’t typically have that amount of funds at their disposal.”
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2024-06-13 02:22