Key Takeaways:
- Terraform Labs to pay $4.47 billion in SEC settlement for Terra collapse
- Do Kwon personally liable for $204 million in penalties and interest
- CEO Chris Amani calls for community takeover
LUCKNOW (CoinChapter.com) — Terraform Labs will dissolve its operations following a $4.47 billion settlement with the U.S. Securities and Exchange Commission (SEC), ending a long case concerning the collapse of the UST algorithmic stablecoin in 2022, which resulted in an estimated $40 billion in losses.
Chris Amani took over as CEO of Terraform Labs from co-founder Do Kwon in July 2023. Now, he announced the company’s plans to wind down operations completely. In a statement on X, Amani called upon the Terra community to take the reins, stating:
“TFL always intended to dissolve at some point, and that point is now. The community will need to take over ownership of the chain.”
Terraform Labs to Sell Off Major Projects
Amani also revealed that Terraform Labs intends to sell its projects within the Terra ecosystem, including Pulsar Finance, Station Wallet, and Enterprise DAO. Furthermore, he proposed a community-led initiative to burn all unvested Luna tokens. The company will burn the remaining vested tokens in Terraform Labs’ wallets.
The total settlement amount includes roughly $3.6 billion in disgorgement fines, a civil penalty of $420 million, and nearly $467 million in prejudgement interest.
Former Terraform Labs CEO Do Kwon is personally liable for $110 million in disgorgement penalties, $80 million in civil penalties, and approximately $14.3 million in pre-judgment interest fines. Do Kwon will have to pay approximately $204 million to a bankruptcy estate for Terraform Labs to compensate harmed investors.
According to the settlement filing, Kwon must transfer $4.7 million into an agreed-upon escrow account within 30 days of the final judgment. Additionally, all crypto assets belonging to the Luna Foundation Guard and all Pyth Network (PYTH) token holdings from Kwon will be transferred to cover the disgorgement fines and prejudgement interest.
Can Community-Led Governance Sustain the Blockchain?
Terraform Labs is on its way to dissolve. However, Amani suggested that the Terra and Terra Classic blockchains could continue under the community’s control. He might be redefining how blockchain projects operate post-crisis. This community-led governance model could serve as a blueprint for other projects facing similar challenges.
The SEC initially charged Terraform Labs and its co-founder, Do Kwon, in February 2023. The regulator accused them of misleading investors and violating federal securities laws through fraudulent activities related to the sale of unregistered securities.
Do Kwon has been behind bars in Montenegro since March 2023, facing extradition risks to either the U.S. or South Korea. Additionally, Kwon has been banned from serving any public company and from engaging in cryptocurrency transactions.
