SEC orders TerraForm Labs and Do Kwon to pay $4.5bn

Judges hammer on top of US flag.
Editorial credit: Mahambah /

The US Securities and Exchange Commission (SEC) has ordered TerraForm Labs and its CEO, Do Kwon, to pay $4.5bn after a jury found them guilty of orchestrating a fraud involving crypto asset securities.

As part of the settlement, TerraForm has agreed to pay $3.5bn in disgorgement, $466.9m in prejudgment interest and a civil penalty of $420m, where as Kwon will pay $110m in disgorgement, $14.3m in prejudgment interest and an $80m civil penalty.

Additionally, TerraForm has agreed to stop selling its crypto assets, shut down its operations, replace two directors and distribute what’s left of its money and property to investors and creditors through a plan approved by the bankruptcy court.

Furthermore, the defendants agreed to a final court order that prohibits them from ever again breaking the registration and fraud rules they were found guilty of violating.

Gary Gensler, SEC Chair, commented: “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.”

“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.”

During the nine-day trial in April, it became evident that TerraForm and Kwon had deceived investors regarding the capabilities of the TerraForm blockchain and the reliability of their crypto asset, UST. 

Evidence presented by the SEC revealed how UST’s value crashed in May 2022, causing significant losses for investors as the market capitalization of TerraForm’s tokens dropped by $40bn almost overnight.

The SEC first accused TerraForm and Kwon of securities fraud on 16 February 2023, in the US District Court for the Southern District of New York. The court ruled on 28 December 2023 that they were responsible for engaging in unregistered transactions with crypto asset securities. 

After TerraForm filed for Chapter 11 bankruptcy on 21 January 2024, a jury quickly reached a unanimous decision on 5 April 2024, confirming their guilt after a short period of deliberation.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said: “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. 

“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.”

“Today’s multi-billion dollar settlement not only holds them accountable and prioritises 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.”