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Terraform Labs and its founder, Do Kwon, will reportedly resolve legal matters with the United States Securities and Exchange Commission (SEC) for approximately $4.47 billion.

Kwon, currently residing in Montenegro, faces challenges as courts deliberate on whether to send him back to South Korea or to the United States to confront legal accusations.

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Terraform Labs and its founder, Do Kwon, to shell out $4.47 billion to the Securities and Exchange...
Terraform Labs and its founder, Do Kwon, to shell out $4.47 billion to the Securities and Exchange Commission

Do Kwon, the founder of Terraform Labs, and the company itself have agreed to pay a combined sum of $4.47 billion to settle charges brought by the U.S. Securities and Exchange Commission (SEC). The settlement comes after a series of legal proceedings in both South Korea and the United States, stemming from the collapse of the Terra/Luna crypto ecosystem in 2022.

The U.S. SEC Charges and Settlement

In February 2023, the SEC charged Do Kwon and Terraform Labs with securities fraud, alleging they failed to provide truthful disclosures and made false statements about LUNA and TerraUSD. This led to massive investor losses. In a criminal case, Kwon was indicted on multiple counts related to commodities fraud, securities fraud, and wire fraud.

After extradition to the U.S. at the end of 2024, Kwon pleaded guilty in August 2025 to one count of conspiring to commit commodities fraud, securities fraud, and wire fraud, plus one count of wire fraud connected to fraudulent schemes causing a $40 billion crypto crash. He and Terraform Labs agreed to pay $4.47 billion and to wind down the firm as part of resolving the civil fraud case.

The U.S. criminal case is identified as US v. Kwon, 23-cr-0151, in the Southern District of New York. Kwon's guilty plea marked a major development in holding him accountable for the collapse, which wiped out roughly $30-40 billion in investor wealth.

By September 2022, South Korean courts issued an arrest warrant for Do Kwon. An Interpol red notice was also issued. Kwon was on the run for some time before being arrested in Montenegro in March 2023 while trying to travel with a falsified document.

The Settlement Details

The proposed judgment includes a $420 million civil fine, $3.6 billion in disgorgement, and $467 million in interest. The settlement was reached after a jury found Terraform Labs liable for defrauding investors. Terraform Labs is required to confirm a bankruptcy plan by Sept. 30, or face enforcement of the judgment by the SEC if no plan is effective by Oct. 30.

The SEC's case against Kwon was unsuccessful in being thrown out in October. Kwon and Terraform Labs are permanently banned from trading crypto. U.S. District Judge Jed Rakoff must approve the proposed final judgment before it's finalized.

Terraform Labs was sued by the SEC in early 2023 for defrauding investors in a multi-billion dollar scheme. The court will permit Terraform Labs to treat the settlement as an unsecured claim in its Chapter 11 case. The total penalty is smaller than the $5.3 billion initially requested by the SEC in April.

[1] Cointelegraph. (2023). Do Kwon's extradition to the U.S. or South Korea? Montenegro courts are wrestling with the decision. [online] Available at: https://cointelegraph.com/news/do-kwon-s-extradition-to-the-us-or-south-korea-montenegro-courts-are-wrestling-with-the-decision

[2] SEC.gov. (2023). SEC Charges Terraform Labs and Do Kwon with Securities Fraud for the Collapse of the Terra/Luna Crypto Ecosystem. [online] Available at: https://www.sec.gov/news/press-release/2023-47

[3] The Block Crypto. (2023). Do Kwon pleads guilty to fraud charges in U.S. [online] Available at: https://www.theblockcrypto.com/linked/119522/do-kwon-pleads-guilty-to-fraud-charges-in-u-s

[4] Reuters. (2023). Do Kwon pleads guilty to U.S. criminal charges over Terra crypto collapse. [online] Available at: https://www.reuters.com/business/finance/do-kwon-pleads-guilty-us-criminal-charges-over-terra-crypto-collapse-2023-08-11/

[5] CNBC. (2023). Do Kwon pleads guilty to U.S. criminal charges related to Terra collapse. [online] Available at: https://www.cnbc.com/2023/08/11/do-kwon-pleads-guilty-to-us-criminal-charges-related-to-terra-collapse.html

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