https://www.theregister.com/2024/06/17/terraform_labs_payment_closure/ # # Sign in / up The Register(r) -- Biting the hand that feeds IT # # # Topics Security Security All SecurityCyber-crimePatchesResearchCSO (X) Off-Prem Off-Prem All Off-PremEdge + IoTChannelPaaS + IaaSSaaS (X) On-Prem On-Prem All On-PremSystemsStorageNetworksHPCPersonal TechCxOPublic Sector (X) Software Software All SoftwareAI + MLApplicationsDatabasesDevOpsOSesVirtualization (X) Offbeat Offbeat All OffbeatDebatesColumnistsScienceGeek's GuideBOFHLegalBootnotesSite NewsAbout Us (X) Special Features Special Features All Special Features Cloud Infrastructure Week Cybersecurity Month Blackhat and DEF CON Sysadmin Month The Reg in Space Emerging Clean Energy Tech Week Spotlight on RSA Energy Efficient Datacenters Vendor Voice Vendor Voice Vendor Voice All Vendor Voice Amazon Web Services (AWS) New Horizon in Cloud Computing DDN Google Cloud Data Transformation Google Gemini Hewlett Packard Enterprise: Edge-to-Cloud Platform Intel vPro VMware (X) Resources Resources Whitepapers Webinars & Events Newsletters [personalte] Personal Tech 17 comment bubble on white Crypto-failure Terraform Labs to cough up $4.5B, liquidate self 17 comment bubble on white South Korean outfit that triggered the world's 'Crypto Winter' will melt away after SEC order icon Simon Sharwood Mon 17 Jun 2024 // 03:32 UTC # Terraform Labs, the outfit behind the $40 billion crash of the TerraUSD stablecoin and its sibling Luna (LUNA) tokens, will pay $4.5 billion to creditors and authorities, then wind itself up. The biz rose to prominence outside cryptocurrency circles in 2022 when the value of TerraUSD dropped from $1 to just nine cents - a disaster given the digital currency was promoted as a "stablecoin" that would maintain its value, in this case by matching the US dollar. Terra falsely claimed to have achieved the Holy Grail of crypto: a non-illicit use case In theory, tokens tied to a fiat currency are a useful instrument because moving money around the world is slow and costly. Schemes that tokenize money and make it faster and cheaper to move are being explored by many in the financial services community. Terraform Labs was one such entity. But its protocol - which aimed to ensure TerraUSD's price would remain stable - failed miserably in part thanks to its underlying blockchain being unable to scale as scared investors sent demand for transactions soaring. Within days of investor panic beginning, over $42 billion in value was effectively erased as stabilization measures such as buying Bitcoin failed to stop the bleeding. [personalte] Do Kwon, one of Terraform Labs' founders, went on the lam and eventually popped up in Montenegro, where he was arrested and later jailed after trying to leave on a false passport. He's since fought extradition to his home country - South Korea - and the US. [personalte] [personalte] While Kwon struggled in Montenegro, US authorities brought a securities fraud case against Terraform Labs, and in April a jury quickly found the company's principals guilty. * Crypto crasher Do Kwon's extradition approved, but destination is unclear * SEC lawsuit against Terraform Labs and cofounder Do Kwon lives to fight another day * South Korea prosecutes Terraform Labs co-founder Daniel Shin * South Korea to treat crypto tokens and virtual assets as if they were securities Last week, the US Securities and Exchange Commission (SEC) announced that Terraform Labs had arranged a payout, and would wind up its affairs. "Terraform agreed to pay $3,586,875,883 in disgorgement, $466,952,423 in prejudgment interest, and a $420,000,000 civil penalty," an SEC statement revealed. 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. That plan can't be finalized until a pending bankruptcy case considers what's left of Terraform Labs. [personalte] Do Kwon will personally 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. "Do Kwon and Terra orchestrated one of the largest securities frauds in US history by, among other things, falsely claiming that they had achieved the Holy Grail of crypto: a non-illicit use case," thundered Gurbir S Grewal, director of the SEC's Division of Enforcement "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," the director added. [personalte] SEC chair Gary Gensler also welcomed the verdict, and windup of Terraform Labs: "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." 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