In a significant development, Terraform Labs has agreed to a $4.47 billion settlement with the U.S. Securities and Exchange Commission (SEC) in relation to the collapse of the UST algorithmic stablecoin in 2022. This collapse led to an estimated $40 billion in losses, prompting the company to wind down its operations.
Chris Amani, who took over as CEO of Terraform Labs from co-founder Do Kwon in July 2023, has called for a community takeover of the company. Amani announced plans to sell off major projects within the Terra ecosystem, such as Pulsar Finance, Station Wallet, and Enterprise DAO. He also proposed a community-led initiative to burn all unvested Luna tokens, with the remaining vested tokens to be burned as well.
The settlement amount includes $3.6 billion in disgorgement fines, a civil penalty of $420 million, and nearly $467 million in prejudgment interest. Former CEO Do Kwon is personally liable for $204 million in penalties and interest, with $4.7 million to be transferred into an escrow account within 30 days of the final judgment.
Despite the dissolution of Terraform Labs, Amani believes that the Terra and Terra Classic blockchains could continue under community control. This community-led governance model may set a precedent for other blockchain projects facing similar challenges, reshaping how such projects operate post-crisis.
The SEC initially charged Terraform Labs and Do Kwon in February 2023 for misleading investors and violating federal securities laws. Kwon, currently behind bars in Montenegro since March 2023, faces extradition risks to the U.S. or South Korea. He has also been banned from involvement in public companies and cryptocurrency transactions.