The Securities and Exchange Commission (SEC) has ordered Do Kwon, the founder of Terraform Labs, to pay over $5 billion in restitution for his role in the collapse of the Terra crypto ecosystem.
The SEC’s decision comes after a Manhattan jury found Kwon and his company civilly liable for misleading investors prior to the 2022 collapse.
Downfall of Terra Crypto
The downfall of the Terra crypto ecosystem has been described as one of the largest in history, costing investors up to $60 billion. Unlike Sam Bankman-Fried, who founded the fraudulent crypto exchange FTX and has become a household name, Kwon has gone more under the radar, even though his crypto scheme wiped out tens of billions more dollars in comparison.
Kwon, 32, was once an idiosyncratic leader that people all over the world were rooting for. With tech bona-fides from Stanford University and experience at Apple and Microsoft, he founded Terraform Labs in 2018, applying his tech and coding genius to the world of crypto. He was featured in Forbes’ 30 under 30 list in 2019 and was frequently among the who’s who of crypto conferences worldwide.
However, the US and South Korea are now in an extradition battle over Kwon, who faces a slew of billion-dollar civil and criminal accusations. After being apprehended in Montenegro in 2023, both countries are fighting over who will bring him to justice.
SEC Charges Against Terra Crypto
Kwon created the cryptocurrency Luna, earning him the unofficial title ‘King of Lunatics’ from Bloomberg. He also created TerraUSD, a stablecoin pegged to the US dollar. At its peak in April 2022, Terra-related coins had a total market cap of around $60 billion, but a month later, it practically went to zero.
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Signs of impending doom were there, with red flags such as the too-good-to-be-true 20 per cent interest offered on the Terra blockchain’s lending-and-borrowing program. Skeptical investors triggered the collapse of TerraUSD and Luna by selling the stablecoin en masse, leading to drastic price drops.
Kwon, who fit in time to wed his glamorous fiancee just months before the collapse, now faces a whirlwind of lawsuits and criminal charges. The SEC’s order includes a ban on Kwon from becoming an officer or director of any company that issues securities.
The comparisons between Kwon and Elizabeth Holmes of Theranos have been drawn, with both being former Forbes-acclaimed start-up CEOs facing serious allegations. Kwon is currently out on bail awaiting extradition, with potential sentences of up to 100 years in the US and 40 years in South Korea.
