In a significant development, Terraform Labs and its founder, Do Kwon, have reached a “settlement in principle” with the U.S. Securities and Exchange Commission (SEC) in a fraud case related to the collapse of TerraUSD in 2022. This agreement was filed in court documents on May 29th.
Market Reaction to the Settlement
The news triggered a surge in Terra (LUNA) and Terra Classic (LUNC) prices. LUNA experienced the most significant gain, jumping by over 30% to reach highs of $0.77.
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LUNC also saw a notable increase, rising by more than 10% to $0.0001284. While both tokens have since dropped some gains, they remain significantly higher than their pre-announcement levels.
Background of the Case
This settlement comes after a recent court ruling found Terraform Labs and Do Kwon liable for fraud related to the TerraUSD collapse. The SEC accused them of misleading investors about the stability of TerraUSD, an algorithmic stablecoin designed to maintain a one-to-one peg with the US dollar.
The SEC alleged that Terraform Labs and Kwon made false statements about the stability and security of TerraUSD, failing to disclose significant risks. They also falsely claimed their blockchain technology was used in a prominent Korean mobile payment app and misrepresented liquidity and trading volume. The TerraUSD collapse in May 2022 resulted in estimated investor losses of over $40 billion.
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Read Also: Do Kwon Speaks On Plans to Airdrop Additional Funds to Victims of TerraUSD (UST) Collapse
Details of the Settlement
The specific terms of the settlement remain confidential at this stage. Both parties are expected to finalize and submit the agreement for court approval by June 12th.
It’s important to note that Do Kwon remains in Montenegro, where he was arrested in 2023. He is currently out on bail and faces extradition requests from the US and South Korea.
This tentative settlement marks a significant development in the ongoing legal saga surrounding the TerraUSD collapse. While the specific details of the agreement are yet to be revealed, it is clear that the market has reacted positively to the news. However, it is crucial to remember that the legal proceedings against Do Kwon are still ongoing in other jurisdictions.
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