Singapore-based Terraform Labs and its founder, Do Kwon, have settled with the SEC to end a civil lawsuit over alleged crypto investor fraud.

This comes after a US District Court jury in New York found them liable for civil fraud in April. Settlement details remain undisclosed, but the tentative agreement is noted on a court website. US District Judge Jed Rakoff has requested both parties to submit supporting documents by June 12.

Civil lawsuit

The SEC accused Kwon and Terraform Labs of misleading investors about the stability of their stablecoin, TerraUSD, and falsely claiming their blockchain technology was used in a prominent Korean mobile payment app. The collapse of TerraUSD and its native token LUNA in May 2022 led to investor losses exceeding $40 billion. The SEC called it a massive deception that wiped out market value almost overnight.

The SEC sought significant penalties, including $5.3 billion in profits deemed ill-gotten and $520 million in fines for Terraform Labs and Kwon. Kwon and his company argued that the maximum allowable fines were much lower, at $3.5 million for Terraform Labs and less than $1 million for Kwon.

Kwon’s imprisonment

Kwon faces related criminal charges in the US and South Korea and has denied wrongdoing. He was arrested in Montenegro in March 2023 for attempting to leave the country with fake documents. Kwon awaits extradition after serving a sentence in Montenegro, with authorities yet to decide whether he will be sent to the US or South Korea.

The settlement marks a significant step in resolving one of the most notable collapses in the crypto market and underscores the SEC’s commitment to addressing fraudulent activities in the crypto space.