Terraform Labs, founder Do Kwon likely face $5.3 billion fines on the two year anniversary of the crisis
Terraform ecosystem’s sister tokens LUNA and UST collapse was preceded by founder Do Kwon’s tweet stating that he is deploying more capital. The tweet did not age well, two years post the crisis, Terraform Labs and founder Do Kwon are faced with $5.3 billion in penalties.
Two year anniversary of Do Kwon’s promise to deploy more capital
On May 9, Do Kwon assured the Terraform community that he is deploying more capital to tackle the de-peg of algorithmic stablecoin UST. On May 11, Kwon presented a strategy to re-establish UST’s peg. Kwon’s tweet from 2022 has resurfaced on X.
In the two years since Kwon’s tweet, the US Securities and Exchange Commission (SEC) has asked a New York court to impose $5.3 billion fines on Terraform Labs and founder Do Kwon. The regulator has asked for a hefty penalty for the entities role in the $40 billion implosion of the Terraform ecosystem tokens.
The SEC has asked for $4.74 billion in legally mandated repayment of ill-gotten gains, and another $420 million from Terraform Labs and $100 million from the founder Kwon. The US financial regulator has justified the fines as a “conservative” but reasonable approximation of Terraform Labs and Do Kwon’s gains from the fraud.
The court ruled that the two parties were found liable on civil fraud charges and court documents revealed $65.2 million sales of LUNA to institutional investors. The Luna Foundation Guard sold $1.8 billion of LUNA and UST.
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 that tore down the glass houses of several crypto trading firms, lenders and resulted in a series of bankruptcies throughout 2022 and 2023.
Terra Foundation restricts access to TFL products for US based users
In the light of recent court developments, the Terra Foundation 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, remained unaffected.
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