Do Kwon, Terraform agree to pay $4.47 billion to settle crypto collapse lawsuit

Do Kwon being taken to court in handcuffs, to face charges of forging official documents, in Montenegro. [REUTERS/YONHAP]

Terraform Labs and its founder, Do Kwon, have agreed to pay $4.47 billion to settle a lawsuit with the U.S. Securities and Exchange Commission (SEC) over the massive collapse of the cryptocurrencies TerraUSD and Luna in 2022.

The SEC requested that a New York court approve the settlement in a lawsuit against the disgraced crypto mogul, indicating that both parties' legal representatives agreed on the amount of fines and penalties. Kwon still faces criminal charges related to the sale of the company’s TerraUSD stablecoin, Bloomberg reported Thursday.

Terraform will pay approximately $3.59 billion plus interest along with a $420 million penalty. Kwon will pay $204.3 million, including $110 million in disgorgement and interest as well as $80 million in penalties.

Additionally, Kwon must transfer at least $204.3 million to the Terraform bankruptcy estate for distribution to investors and will be barred from serving as an officer or director of a publicly listed company.

The final settlement is less than the $5.26 billion initially proposed by the SEC.

The agency filed a lawsuit against Kwon and Terraform Labs, alleging that they deceived investors about the financial stability of TerraUSD, leading to significant investment losses back in November 2021.

The SEC argued that Kwon and Terraform Labs illegally profited over $4 billion.

In response, Terraform Labs argued that it should not have to pay the fines as the cryptocurrency trades took place outside the United States.

Kwon has been detained in Montenegro since March of last year after being arrested on charges of passport forgery during his flight from justice.

He is also facing charges in Korea, which is seeking his extradition along with the United States. His destination has yet to be determined.

BY CHOI HAE-JIN [choi.haejin@joongang.co.kr]