Just In: Terraform Labs To Cease Operations After SEC Settlement

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Julia Smith

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Julia is an experienced editor with a passion for covering a wide variety of beats. She loves all things politics and regularly covers regulatory updates on emerging technology here for Crypto News.

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June 13, 2024 11:05 EDT

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After settling its civil fraud suit with the U.S. Securities and Exchange Commission (SEC) on June 12, Terraform Labs, the blockchain protocol created by Do Kwon, announced it will cease operations on Thursday.

Terraform Labs CEO Reveals Company Is “Winding Down”

In a series of X posts, the company’s current CEO, Chris Amani, stated that Terraform always intended to dissolve and is now closing operations completely.

According to Amani, what remains of the now bankrupt crypto company will be sold to digital asset portfolio manager Pulsar Finance, wen3 interface Station Wallet, and DAO management firm Enterprise Protocol.

1/ With the proposed settlement now public, i can finally share some details about what is next for TFL.

— Chris Amani | Terra (@fleece_cannon) June 12, 2024

“I’m incredibly proud that we were able to hold this company and ecosystem together and continue to build innovative products through all of this,” Amani wrote. “We were well positioned to accelerate things if we had won the trial, but unfortunately we lost and as a result, can no longer operate.”

Do Kwon Versus The SEC

The SEC’s $4.5 billion fine against Kwon and his now disgraced Terraform Labs, announced Wednesday, is considerably less than the $5.3 billion originally sought by the federal regulator in April.

Lawyers for Kwon pushed back against the SEC’s original request and argued that Kwon should only face a maximum penalty of $1 million despite costing $40 billion to be wiped from the crypto market.

“If approved, the proposed judgement will send an unmistakable deterrent message to not only those who engage in brazen misconduct, but also to all those who seek to evade the requirements of the federal securities laws by crafting new standards of behavior for crypto assets that fall under the purview of federal securities laws,” lawyers for the SEC wrote in a letter accompanying Wednesday’s settlement agreement.

Where To Next?

News of Terraform Labs’ settlement and subsequent shuttering comes just two months after Kwon was found liable for causing algorithmic stable coins Terra and Luna to crash in spring 2022.

Following the crash, Kwon successfully evaded authorities for months by hiding out in various locations across Europe and Asia before ultimately getting caught in Montenegro last spring when he tried to board a plane out of the country using fraudulent documents.

Kwon has since been held in the Balkan country as he awaits potential extradition to the United States or his native South Korea, with both countries fighting over where Kwon will be sent to face further consequences for his massive crypto fraud scheme.

More information on the crypto company’s shutdown will reportedly be made available in the coming weeks.