LUNA's bankruptcy incident comes to an end with a fine of 4.5 billion US dollars

Source: Blockchain Knight

In this high-profile case brought by the U.S. Securities and Exchange Commission (SEC), the U.S. District Court for the Southern District of New York has issued a final judgment against Terraform Labs and its co-founder Do Kwon.

The judgment found the defendants guilty of multiple securities violations and imposed severe penalties and restrictions on their future activities. The penalties include fines totaling approximately $4.5 billion.

According to court documents on June 12, the judgment includes $3.6 billion in fines and disgorgement, $467 million in withholding interest, and $420 million in civil penalties.

Kwon is jointly and severally liable for the aforementioned $110 million in fines and disgorgement and $14.3 million in estimated interest.

In addition, Kwon must transfer various assets to the Terraform bankruptcy estate, including ownership interests in PYTH tokens and other assets. These assets will be used to pay fines and distributed to damaged investors through a liquidation trust.

The order allows Terraform Labs to treat the amounts due as unsecured claims in its bankruptcy case, meaning the SEC will receive those funds based on the priority of distribution after Terraform Labs’ bankruptcy plan becomes effective.

The SEC is authorized to use all authorized collection processes to enforce the court’s judgment, including the right to exercise civil contempt if Kwon fails to comply with the transfer order within 30 days of judgment.

Kwon must also pay $204.3 million in relief, separate from Terraform Labs’ payment obligations, including $110 million in disgorgement, $14.3 million in prejudgment interest, and an additional $80 million in civil penalties.

The order states that Terraform Labs and Kwon violated the anti-fraud provisions of Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act.

In addition, it permanently prohibits Terraform Labs and Kwon from trading unregistered securities, trading crypto asset securities, or inducing others to trade crypto asset securities, among other related restrictions.

These restrictions allow Terraform to execute certain transactions related to its bankruptcy case.

With court approval, the company can dispose of crypto assets from its bankruptcy estate and must destroy wallet keys and burn tokens as required.

Terraform Labs and Kwon will be prohibited from conducting any trading activities on its platform and may not allow third parties to withdraw, unlock, and close positions on its platform.

The order also permanently prohibits Kwon from serving as an officer or director of any issuer with a registered securities class or reporting obligations. The SEC began its lawsuit against Terraform Labs and Kwon in February 2023, accusing the company of defrauding crypto asset investors, including through its now-defunct Terra USD (UST) stablecoin. In April of this year, the court found the defendants liable for fraud.