Terraform Labs and its former CEO, Do Kwon, have reached a preliminary settlement to resolve a fraud action against the US Securities and Exchange Commission, as per the court filings.
During a May 29 phone call with Judge Jed Rakoff, the attorneys for both parties revealed a settlement in principle. It is anticipated that the settlement terms will be completed and presented to the court by June 12, 2024, for approval.
In February, the SEC ruled that Terraform and Kwon were responsible for misleading investors. On May 29, the parties were supposed to talk about the case’s remedies.
The SEC is suing Terraform and Kwon regarding the deceptive marketing and sales of TerraUSD (UST) and associated coins. They have been accused of misleading investors regarding the stability and financial potential of the tokens, as well as engaging in unregistered offerings.
The most recent crypto winter began in May 2022 with the shuttering of Terraform Labs, which caused a severe decline in all markets that impacted numerous cryptocurrency companies and investors.
The SEC requested disgorgement, prejudgment interest, and civil penalties totaling around $5.3 billion, which would have resulted in a substantial financial punishment for Kwon and Terraform.
In the meanwhile, Terraform Labs suggested a far smaller fine of $1 million, arguing against disgorgement, particularly from connected companies like the Luna Foundation Guard that were not specifically included in the SEC’s lawsuit.
The SEC proposed banning Kwon from serving as an officer or director in any securities-issuing entity and demanded full disclosure of his financial accounts and assets. Kwon argued that disclosing this information would violate his Fifth Amendment rights against self-incrimination.
Kwon faces possible charges in Montenegro after being arrested in March 2023 for allegedly forging travel credentials while attempting to flee the country. Later, he was granted bail and the United States is requesting his extradition.
Also Read: Montenegro and SEC Discuss Terraform Labs Investigation
