SEC v. Terraform Labs and Do Kwon

Allegations & issues

The SEC alleged securities fraud and unregistered offerings involving Terraform’s crypto assets. [2]

Key rulings & findings

The court ruled on unregistered offerings in December 2023; the jury found fraud liability on 5 April 2024. [1, opening recitals; 2]

Admissions

Liability was adjudicated. Agreement to remedies should not be described as a settlement without any finding of wrongdoing. [1]

Disposition

Final consent judgment approved on 12 June 2024; the defendants waived appeal from that judgment. [1, opening recitals; 3]

Penalties, damages & redress

Terraform: approximately $3.587 billion disgorgement, $467 million interest and $420 million civil penalty. Kwon: $110 million disgorgement and $14.32 million interest jointly with Terraform, plus an $80 million penalty. Joint amounts must not be counted twice. [2]

Restrictions & obligations

Permanent securities-law injunctions; Terraform agreed to stop selling its crypto asset securities and wind down. [2]

Liability came before the remedies settlement

The SEC brought its civil action in February 2023. The district court ruled on unregistered securities offerings in December 2023, and a jury found Terraform and Do Kwon liable for securities fraud on 5 April 2024. The later agreement resolved remedies against that background; it was not a dismissal of the fraud case. [1; 2]

The SEC’s account of the trial identifies representations about the use of the Terraform blockchain for payment transactions and the stability of UST. Its announcement distinguishes the earlier registration ruling from the jury’s fraud verdict. Those are separate bases of liability and should not be collapsed into a general description of a cryptocurrency settlement. [2]

The monetary figures and distribution process

Terraform’s obligations comprised disgorgement, prejudgment interest and a civil penalty. Kwon’s obligations included amounts that overlapped with Terraform’s liability. Adding every listed figure together without accounting for joint liability would overstate the combined judgment. The final judgment controls the amounts and their allocation. [1; 2]

The resolution also contemplated winding down Terraform and distributing remaining assets through bankruptcy procedures. A judgment amount is not the same as money already recovered by investors: actual distributions depend on available assets and the relevant court processes. The SEC maintains a separate distribution page for that process. [2; 3]

THE UNDERLYING RECORD

Primary sources

Read the full documents for their precise wording and context. Regulator summaries are identified separately from court records.