TerraForm Labs has agreed to a $4.47 billion civil settlement with the U.S. Securities and Exchange Commission. They were found liable by a jury for misleading cryptocurrency investors who suffered losses of an estimated $40 billion when their TerraUSD and Luna tokens crashed in 2022, causing a widespread downturn in the cryptocurrency industry.
A final sentence against Terraform and its founder Do Kwon was filed in Manhattan federal court on Wednesday. The sentence is still pending approval from U.S. District Judge Jed Rakoff, who presided over the trial that concluded on April 5.
TerraForm’s judgment includes $4.05 billion in disgorgement and interest, as well as a civil penalty of $420 million. Due to TerraForm’s bankruptcy filing in January, it is unlikely that most of this amount will be paid and will be treated as an unsecured claim in the ongoing Chapter 11 liquidation process.
The total judgment amounts to $4.55 billion, which includes an $80 million civil penalty against Kwon. Kwon is also required to agree to a ban from cryptocurrency transactions and transfer $204.3 million to TerraForm’s bankruptcy estate.
The SEC stated in a court filing that, “If entered, this judgment would ensure maximum recovery for harmed investors and permanently shut down TerraForm. Accordingly, the proposed judgment is fair, reasonable, and in the public interest.”
Both Terraform and Kwon have agreed to the sentence. No immediate comments were provided by the men’s lawyers. Kwon was previously found guilty of fraud in an early April civil lawsuit filed in Manhattan.
The SEC alleged that TerraForm and Kwon misled investors regarding the stability of TerraUSD, which was meant to maintain a constant value of $1. They were also accused of falsely claiming that TerraForm’s blockchain was utilized in a popular mobile payment application in South Korea.
Luna, a more traditional token created by Kwon and closely linked to TerraUSD, plummeted in May 2022 when TerraUSD failed to uphold its peg to the dollar.
Kwon has been detained in Montenegro since March 2023, with the United States and South Korea seeking his extradition for criminal prosecution, although he has not yet appeared in court. Kwon maintains his innocence.
Source: www.theguardian.com
