One of the largest cryptocurrency collapses is nearing its end as Terraform Labs agrees to pay the SEC $4.47 billion. The SEC has asked a federal judge in the Southern District of New York to approve the settlement. This development follows a judicial ruling two months ago that found Terraform Labs guilty of reckless conduct. Terraform will pay $3.5 billion plus interest and an additional $420 million penalty.

The co-founder of Terraform will also pay $204.3 million in disgorgement, interest, and penalties. LUNA, the token of the Terra blockchain, has seen a slight increase, although the network lost nearly 50% of its value. The settlement represents only a fraction of the funds lost during Terraform's collapse in May 2022. Terraform Labs had launched LUNA and the UST algorithmic stablecoin backed by LUNA. The multibillion-dollar settlement has raised doubts about Terraform Labs' ability to pay the debt.

The agreement follows the $40 billion market loss in 2022 due to the Terra ecosystem's collapse. The recent court filing details the agreement between the SEC and Terraform Labs, which includes disgorgement, prejudgment interest, and civil penalties. Terraform Labs had previously declared bankruptcy before its trial against the SEC. The SEC asserts that the penalties are justified and legal, aiming to deter other companies from deceptive practices.

The SEC believes the penalties are appropriate given the significant investor losses due to Terraform Labs' fraudulent activities. The judgment focuses on remedial, deterrent, and punitive measures. The SEC's decision is intended to aid in the recovery of investors harmed by the fraud, accusing Terraform Labs and its founder of one of the most significant securities frauds ever.

The settlement will prohibit Terraform Labs from trading cryptocurrency securities, pending approval by the supervising New York judge. This ban will affect tokens in the Terra ecosystem.

Representatives of Terraform Labs were unavailable for comment. The collapse of Terraform’s products in 2022 led to substantial losses for cryptocurrency investors. The CEO of Terraform Labs will contribute $200 billion to the Terraform bankruptcy estate. In May 2022, TerraUSD and Luna suffered severe declines, resulting in approximately $40 billion in investor losses.