In a significant action against fraudulent practices within the cryptocurrency industry, a federal judge has granted approval for a $4.5 billion settlement between the Securities and Exchange Commission (SEC) and Terraform Labs, together with its former CEO, Do Kwon. This settlement stems from the aftermath of the collapse of the Terra ecosystem in 2022, which resulted in substantial losses for investors and market instability. U.S. District Court Judge Jed Rakoff finalized the $4.5 billion settlement, bringing closure to a legal dispute that emerged following the collapse of the Terra ecosystem in May 2022.

The approved settlement, announced on June 14, 2024, imposes a comprehensive ban that prohibits Kwon and Terraform Labs from engaging in the trading of “crypto asset securities.” Moreover, as part of the agreement, Terraform Labs and Kwon are obligated to collectively pay $4.5 billion, which encompasses disgorgement, prejudgment interest, and civil penalties. This resolution follows a ruling by a New York jury, holding Terraform Labs and Kwon civilly liable for fraudulent activities just two months prior to the settlement approval.

The substantial fine imposed on Terra and its executives serves as a clear warning to individuals involved in crypto fraud, underscoring the consequences of deceptive practices in the cryptocurrency space.