Summary:
Terraform Labs has agreed to a $4.47 billion settlement with the SEC for the collapse of the UST algorithmic stablecoin, leading to $40 billion in losses. Former CEO Do Kwon will pay $204 million in penalties. Current CEO Chris Amani has called for a community takeover.
Terraform Labs
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LUCKNOW (CoinChapter.com) — Following a $4.47 billion settlement with the SEC, Terraform Labs will shut down its operations due to the collapse of the UST algorithmic stablecoin in 2022. The company faced losses of around $40 billion as a result.
Source:
X
Chris Amani took over as CEO of Terraform Labs from co-founder Do Kwon in July 2023. He has announced the company’s decision to wind down operations completely. Amani has urged the Terra community to step up and take charge, stating:
Terraform Labs to Liquidate Major Projects
Amani has also disclosed that Terraform Labs plans to sell off its projects within the Terra ecosystem, such as Pulsar Finance, Station Wallet, and Enterprise DAO. He has proposed a community-driven initiative to burn all unvested Luna tokens, with the company burning the remaining vested tokens in its wallets.
The settlement amount includes approximately $3.6 billion in disgorgement fines, a civil penalty of $420 million, and nearly $467 million in prejudgment interest.
Page 8 of the SEC settlement documents. Source:
Court Listener
Former Terraform Labs CEO Do Kwon is personally responsible for $110 million in disgorgement penalties, $80 million in civil penalties, and around $14.3 million in pre-judgment interest fines. Kwon will need to pay about $204 million to a bankruptcy estate to compensate affected investors.
As per the settlement, Kwon must transfer $4.7 million to an agreed-upon escrow account within 30 days of the final judgment. Furthermore, all crypto assets owned by the Luna Foundation Guard and PYTH token holdings from Kwon will be used to cover the disgorgement fines and prejudgment interest.
Can Community-Governed Governance Sustain the Blockchain?
Despite Terraform Labs winding down, Amani believes that the Terra and Terra Classic blockchains could continue under community control. This community-led governance model could set the standard for other projects dealing with similar challenges post-crisis.
The SEC initially charged Terraform Labs and its co-founder, Do Kwon, in February 2023, accusing them of misleading investors and violating securities laws through fraudulent activities involving unregistered securities.
Currently detained in Montenegro since March 2023, Kwon faces extradition risks to the U.S. or South Korea. He has been barred from involvement in public companies and cryptocurrency transactions.