Fined 45 billion US dollars, LUNA's thunderstorm incident comes to a final conclusion

In this high-profile case brought by the Securities and Exchange Commission (SEC), the United States 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 that the defendants’ multiple violations of securities laws were established, and imposed severe penalties and restrictions on their future activities. The penalties include fines totaling approximately $4.5 billion.

According to the court documents on June 12, the judgment amount includes a $3.6 billion fine, $467 million in pre-withheld interest, and a $420 million civil penalty.

Kwon is jointly liable for the aforementioned $110 million fine and the estimated interest of $14.3 million.

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

This command allows Terraform Labs to treat accounts payable as unsecured claims in its bankruptcy case, which means that the SEC will receive these funds according to the distribution priority after Terraform Labs’ bankruptcy protection plan takes effect.

The SEC is authorized to use all authorized collection procedures to enforce court judgments, including the power to exercise civil contempt court authority if Kwon fails to comply with the turnover order within 30 days after the judgment.

Kwon must also pay a relief fund of $204.3 million, separating it from Terraform Labs’ payment obligations, which include a $110 million fine, $14.3 million in pre-judgment interest, and an additional $80 million in civil penalties.

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

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

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

With the court’s approval, the company is allowed to dispose of its bankruptcy assets in Crypto, and must destroy wallet keys and burn tokens as required.

Terraform Labs and Kwon will be prohibited from conducting any trading activities on their platform, nor shall they allow third parties to withdraw, unlock, and close positions on their platform.

This command also permanently prohibits Kwon from serving as an executive or director of any issuer with registered securities or reporting obligations.

The SEC filed a lawsuit against Terraform Labs and Kwon in February 2023, accusing the company of defrauding Crypto asset investors, including fraud through its now-defunct Terra USD (UST) stablecoin. In April of this year, the court found the defendant liable for fraud.