Terraform Labs has agreed to settle a civil lawsuit brought by the United States Securities and Exchange Commission (SEC) with an approximate payment of $4.47 billion. This settlement stems from the fallout following Terraform's collapse in 2022. The fines included in the agreement total around $3.6 billion for disgorgement, a civil penalty of about $420 million, and approximately $467 million in pre-judgment interest.

The SEC's lawsuit followed a jury verdict that held Terraform Labs and its co-founder responsible for the breakdown of the Terra ecosystem, resulting in investor losses of approximately $40 billion.

As part of the settlement, former CEO Do Kwon of Terraform Labs faces disgorgement penalties amounting to $110 million, civil penalties of $80 million, and about $14.3 million in pre-judgment interest fines. Kwon's financial obligations under the settlement will be deemed satisfied upon his transfer of at least $204,320,196 to the SEC, excluding the value of any Terraform Crypto Assets, along with an additional $4,700,000 into a designated escrow account within 30 days of the final judgment.

Additionally, the settlement requires the transfer of all cryptocurrency assets held by the Luna Foundation Guard and all Pyth Network (PYTH) token holdings from Kwon to help meet the disgorgement fines and pre-judgment interest. Proceeds from the sale of these assets will be used to cover the civil penalty fines.

The SEC's lawsuit, filed in 2023, alleged that Terraform Labs and Do Kwon defrauded investors by selling unregistered securities following the collapse of the Terra ecosystem. The collapse occurred amid instability in the TerraUSD algorithmic stablecoin in 2022, leading to investor concerns.

The legal fate of Do Kwon remains uncertain as courts in Montenegro deliberate on extradition proceedings. Kwon's defense lawyers argue that procedural errors and filings compromised the lower court proceedings. The Montenegro high court is currently reviewing whether to extradite Kwon to South Korea, his home country, or to the United States to face charges.