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Breaking: Terraform Labs and Do Kwon Agree To Settle SEC Case

Julia Smith
Last updated: | 2 min read
Do kwon, Terraform Labs, SEC Do Kwon

Terraform Labs and Do Kwon have reportedly agreed to settle their case with the United States Securities and Exchange Commission (SEC), new court documents revealed Thursday.

According to court records, an oral argument between Do Kwon, Terraform Labs, and the SEC scheduled for May 29 was canceled “because the parties have informed the Court that they reached a settlement in principle.”

Do Kwon, Terraform Labs Settle With SEC Over Terra-Luna Collapse Case

Both parties have until June 12 to submit papers to effectively finalize the agreement.

The SEC originally proposed a sweeping $5.3 billion fine against Kwon and his crypto company, Terraform Labs. Kwon pushed back against the hefty fine last month, instead requesting a maximum penalty of $1 million, however.

Similarly, the federal regulator requested that Kwon be banned from operating as a securities officer and director of any securities issuer while requiring the disgraced former CEO to hand over personal accounts.

Lawyers for Kwon claimed that doing so would violate their client’s 5th amendment rights by potentially self-incriminating him.

Where Will Kwon Be Extradited Following Stint In Montenegrin Prison?

News of the settlement comes just one month after Kwon was found liable for decimating $40 billion from cryptocurrency markets due to the collapse of his algorithmic stablecoins Terra and Luna in May 2022.

“We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD,” SEC Chair Gary Gensler said in a February 2023 statement. “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”

Following the announcement, Terra’s price dramatically surged by over 16.5%.

Kwon, meanwhile, is being held in Montenegro as both the U.S. and his native South Korea battle for his extradition.

The former founder and CEO was originally arrested in the Balkan country in March 2023 for falsifying travel documents as he attempted to flee Montenegro after a months-long search that spanned parts of Europe and Asia.

Earlier this month, Montenergro’s Appellate Court halted his potential extradition following an appeal from his lawyers. The decision will now be reviewed by the country’s High Court.

If approved, the settlement marks the end of a dramatic legal saga between the federal regulator and Kwon and his company. Terms of the deal have yet to be revealed to the public.