Terraform Labs and its founder Do Kwon are set to pay $4.47 billion to the Securities and Exchange Commission (SEC) to resolve allegations of securities law violations.

In a significant development, Terraform Labs and its founder Do Kwon have agreed to pay a combined sum of $4.47 billion to settle charges brought forth by the Securities and Exchange Commission (SEC).

The settlement comes after a jury found Terraform Labs liable for defrauding investors when the Terra/Luna crypto ecosystem collapsed in 2022, an event that kickstarted turmoil in the crypto market. The collapse led to the SEC filing a lawsuit against Terraform Labs in early 2023, accusing them of defrauding investors in a multi-billion dollar scheme.

The proposed final judgment, which must be approved by U.S. District Judge Jed Rakoff, includes a $420 million civil fine, $3.6 billion in disgorgement, and $467 million in interest. The court documents also mention Kwon's unsuccessful attempt to have the SEC's case against him thrown out.

Kwon, currently residing in Montenegro, has faced legal action from South Korea as well, with demands for his extradition. Courts in Montenegro are currently deciding whether to extradite Kwon to South Korea or the U.S.

In addition to the financial penalties, Terraform Labs and Kwon are permanently banned from trading crypto. The SEC warned that brazen misconduct in crypto markets will not be tolerated, emphasising its commitment to protecting investors.

Terraform Labs has filed for bankruptcy in January and, according to the court documents, shall use its best efforts to confirm a bankruptcy plan by September 30. If no plan is effective by October 30, the SEC may enforce Wednesday's judgment against Terraform Labs.

The total penalty is smaller than the $5.3 billion initially requested by the SEC in April, but the SEC wrote that Defendants have not shown remorse for their conduct and that additional violations are possible. The court will permit Terraform Labs to treat the settlement as an unsecured claim in its Chapter 11 case.

This settlement marks a significant step in holding those responsible for misconduct in the crypto market accountable, setting a precedent for future cases.

Terraform Labs and its founder Do Kwon are set to pay $4.47 billion to the Securities and Exchange Commission (SEC) to resolve allegations of securities law violations.