Terraform Labs to Dissolve After $4.5 Billion SEC Settlement Over LUNA, UST

Terraform Labs CEO Chris Amani disclosed Wednesday that the firm behind the $40 billion collapse of LUNA and UST in 2022 is dissolving following a $4.5 billion settlement agreement with the U.S. Securities and Exchange Commission.

“[Terraform Labs] always intended to dissolve at some point, and that point is now,” Amani wrote on Twitter (aka X) “We will be winding down operations completely.”

The company and its former CEO, Do Kwon, agreed to cough up billions of dollars Wednesday, according to documents filed in a civil fraud case brought by regulators last year. As part of the agreement, both entities were prohibited from engaging in crypto transactions moving forward.

The SEC notched a high-profile win against Kwon and Terraform Labs months ago, when a New York jury in April found the firm and its former CEO had engaged in securities fraud through misrepresentations about Terra’s success and stability.

Prior to its defeat, Terraform Labs and its community “were well positioned to accelerate things” for Terra’s ecosystem, Amani wrote. But after being delivered a stiff loss in court, Amani signaled that the company “can no longer operate.”

Amani said the firm will sell off several of its projects as Terraform Labs winds down: the portfolio manager Pulsar Finance, the Cosmos wallet Station, and a protocol for creating DAOs within Cosmos called Enterprise Protocol.

“The community will need to take over ownership of the chain,” Amani wrote, adding that a community proposal to burn LUNA tokens held by Terraform Labs would go live soon.

Armani’s announcement comes nearly a year after he was appointed the firm’s director and CEO. Taking the reins at Terraform Labs last July, he previously served as the company’s COO before stepping into Kwon’s shoes—as his former boss dealt with “personal legal affairs.”

At the time, Amani lauded the “incredible resilience” of Terraform Labs’ workers and Terra’s community, which had voted to rebuild the beleaguered blockchain without algorithmic stablecoins. "The process won't be easy, but we have a clear vision,” Armani had stated.

Algorithmic stablecoins aren’t backed by a mix of cash, U.S. Treasuries, and other debt, like most currently are. Instead, they are backed by a series of trading incentives and no assets.

Kwon had been arrested months before Armani’s appointment while trying to travel in Montenegro with falsified documents. Amid a back-and-forth over the former CEO’s extradition, Kwon remains in the region, despite being released from custody in March.

In January, Terraform Labs filed for Chapter 11 bankruptcy. And as part of Wednesday’s settlement agreement, Kwon himself is set to pay $204 million in penalties and disgorgement while transferring funds to the firm’s bankruptcy estate.

Terraform Labs agreed to pay back $4.5 billion in ill-gotten gains alongside a penalty of $240 million. While the value of its intellectual property and office furniture was undetermined, the company disclosed in late April that it still owned $430 million worth of property.

Edited by Andrew Hayward