Press Release

Terraform and Kwon to Pay $4.5 Billion Following Fraud Verdict

Kwon to contribute more than $200 million, Terraform to wind down, and assets to be distributed to investor victims and creditors in bankruptcy

For Immediate Release


Washington D.C., June 13, 2024 —

The Securities and Exchange Commission today announced that Terraform Labs PTE, Ltd. and Do Kwon agreed to pay more than $4.5 billion following a unanimous jury verdict holding them liable for orchestrating a years-long fraud involving crypto asset securities that led to massive investor losses when the scheme unraveled.

A nine-day jury trial in April exposed the extent of the defendants’ lies to victims about the false use of the Terraform blockchain to settle transactions and about the stability of their crypto asset security, UST. The SEC also offered evidence at trial showing that, in May 2022, after UST de-pegged from the U.S. dollar, the price of UST and Terraform’s other tokens plummeted to close to zero. This wiped out $40 billion in market value nearly overnight and caused devastating losses to countless investors, including numerous retail investors who believed defendants’ lies and poured their life savings into Terraform’s ecosystem.

“This case affirms what court after court has said: The economic realities of a product—not the labels, the spin, or the hype—determine whether it is a security under the securities laws,” said SEC Chair Gary Gensler. “Terraform and Do Kwon’s fraudulent activities caused devastating losses for investors, in some cases wiping out entire life savings. Their fraud serves as a reminder that, when firms fail to comply with the law, investors get hurt. Terraform and Kwon fought our efforts to investigate – taking a fight over investigative subpoenas all the way to the Supreme Court. Thankfully, with this settlement, the victims of their massive fraud will now get some justice.”

“Do Kwon and Terra orchestrated one of the largest securities frauds in U.S. history by, among other things, falsely claiming that they had achieved the Holy Grail of crypto: a non-illicit use case. As the jury found, that was a lie, as was their claim of creating an ‘algorithmic stablecoin.’ In the end, all they succeeded in doing was lying to investors, wiping out tens of billions of dollars in market value, and creating a trail of victims,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Today’s multi-billion dollar settlement not only holds them accountable and prioritizes the return of hundreds of millions of dollars to harmed investors, but also makes clear that, despite the vast resources that crypto asset defendants deploy against us, the dedicated staff of the Division of Enforcement will not stop until they achieve justice for the victims of these breathtaking frauds.”

The SEC charged Terraform and Kwon in U.S. District Court for the Southern District of New York on February 16, 2023, with securities fraud and for offering and selling securities in unregistered transactions. On December 28, 2023, the District Court found Terraform and Kwon liable for offering and selling crypto asset securities in unregistered transactions. On January 21, 2024, Terraform filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the District of Delaware. On April 5, 2024, a jury unanimously found Terraform and Kwon liable for securities fraud after less than two hours of deliberation.

As part of the settlement, Terraform agreed to pay $3,586,875,883 in disgorgement, $466,952,423 in prejudgment interest, and a $420,000,000 civil penalty. Terraform also agreed to stop selling its crypto asset securities, wind down its operations, replace two of its directors, and distribute its remaining assets to investor victims and creditors through a liquidation plan, subject to approval by the court in Terraform’s pending bankruptcy case.

Kwon agreed to pay $110,000,000 in disgorgement and $14,320,196 in prejudgment interest on a joint and several basis with Terraform, as well as an $80,000,000 civil penalty.

In addition, the defendants consented to the entry of a final judgment permanently enjoining them from violating the registration and fraud provisions they violated.

The litigation is being handled by Devon Staren, Laura Meehan, Christopher Carney, and Carina Cuellar from the Trial Unit, as well as Roger Landsman, and supervised by James Connor and Jorge Tenreiro. The SEC is represented in Terraform’s bankruptcy case by Therese Scheuer, Michael Kelly, and William Uptegrove, with supervision by Alistaire Bambach. The investigation was conducted by Mr. Landsman, Elisabeth Goot, Kathleen Hitchins, James Murtha, Daniel Koster, Donald Battle, and David Crosbie and was supervised by Reid Muoio, Osman Nawaz, Mr. Tenreiro, and David Hirsch from the Complex Financial Instruments and Crypto Assets and Cyber Units.


Last Reviewed or Updated: July 2, 2024