Two years after the collapse of Terraform ecosystem's sister tokens LUNA and UST, Terraform Labs and its founder Do Kwon are facing $5.3 billion in penalties. This is due to the role they played in the $40 billion implosion of the Terraform ecosystem tokens.

The US Securities and Exchange Commission (SEC) has asked a New York court to impose these fines. The SEC has asked for $4.74 billion in repayment of gains from the fraud, $420 million from Terraform Labs and $100 million from Do Kwon. The financial regulator has justified the fines as a reasonable approximation of Terraform Labs and Do Kwon's gains from the fraud.

The collapse of the Terraform ecosystem, Kwon's "ill-gotten gains" and the court fines are the aftermath of the $4 billion implosion in 2022. This implosion resulted in the collapse of several crypto trading firms, lenders and a series of bankruptcies throughout 2022 and 2023.

In light of recent court developments, the Terra Foundation has made changes to its operations and announced that it will restrict access to some of its products and features for users in the United States. Open-source projects that TFL contributed to, such as the Terra blockchain and Alliance, remain unaffected.