Terraform Labs, the parent company of the now-collapsed cryptocurrencies terraUSD and luna, has agreed to a $4.5 billion settlement with the U.S. Securities and Exchange Commission (SEC). The settlement comes after a jury found the company and its co-founder and CEO, Do Kwon, liable for securities fraud.
Terraform Labs was behind one of the most popular U.S.-pegged stablecoins. However, unlike most stablecoins that are backed by a mix of cash and other assets, Terraform Labs’ stablecoin was backed by a complex set of code. When the algorithm failed in May 2022, it led to a loss of $40 billion in market value overnight, causing significant losses for investors and contributing to the collapse of several crypto lenders and hedge funds.
The fallout from the stablecoin’s implosion also shook confidence in the crypto sector and accelerated a broader pullback from risk. In the years since U.S. courts have been working to clean up the wreckage by prosecuting bad actors and fining fallen firms.
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