The U.S. Securities and Exchange Commission (SEC) and Terraform Labs, along with its founder Do Kwon, have reached a preliminary settlement regarding allegations of misleading investors about TerraUSD.
Singapore-based Terraform Labs and Do Kwon have tentatively settled with the SEC over accusations of deceiving crypto investors prior to the 2022 collapse of the TerraUSD stablecoin.
According to Reuters, which referenced court documents, the specific terms of the settlement have not been disclosed. However, a jury previously found Kwon and Terraform Labs liable for civil fraud charges.
The SEC charged Terraform Labs and Kwon with misleading investors in 2021 regarding the stability of TerraUSD, a stablecoin intended to maintain a $1 value. The agency also claimed that Kwon and the company falsely asserted that Terraform’s blockchain was utilized in a widely-used Korean mobile payment app.
The crypto community seems split on the implications of the settlement. While some predict a positive effect on Terra Classic’s (LUNC) price, others are skeptical about how the company intends to reimburse the funds.
In 2021, the SEC accused Terraform Labs and Do Kwon of misleading investors about the stability of TerraUSD, a stablecoin intended to maintain a value of $1. The SEC also alleged that Kwon and the company falsely claimed that Terraform’s blockchain was integrated into a widely-used Korean mobile payment app.
The crypto community is divided on the implications of this settlement. Some predict a positive effect on Terra Classic’s (LUNC) price, while others are skeptical about how the firm intends to repay the investors.
The SEC previously demanded that Kwon and Terraform Labs surrender $5.3 billion in profits from stablecoin sales that were allegedly obtained improperly. Additionally, the SEC sought fines of $420 million against the company and $100 million against Kwon, along with bans on trading in “crypto asset securities.”
Following the announcement, LUNC surged by over 9% to $0.00012, while the new token, LUNA, experienced a gain of more than 13%, as reported by CoinMarketCap.
The collapse of TerraUSD and Terra Classic caused disruption in cryptocurrency markets in May 2022, leading to the SEC’s estimation of over $40 billion in investor losses. Kwon and Terraform Labs argued that the maximum fines should be $3.5 million for Terraform Labs and less than $1 million for the TerraUSD mastermind.
Kwon and Terraform Labs argued that fines ought to be capped at $3.5 million for the company and less than $1 million for Kwon concerning the TerraUSD situation.
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