SEC v. Terraform Labs and Do Kwon: How the Case Ended
Updated October 2026, after Do Kwon's sentencing. First published June 2024.
The first version of this post, written days after the settlement, called it a "$4.47 billion fine" and predicted that the SEC would keep pressing crypto firms. Both need correcting. The SEC's own figure is "more than $4.5 billion," most of it disgorgement rather than a penalty, and $4.47 billion is Terraform's share alone. And within a year, the SEC's new leadership dropped seven crypto cases brought under the prior chair. Terraform's judgment stayed in place because it rested on a fraud verdict.
Here is how the case ran, what each defendant owes, and how the criminal case against Do Kwon ended.
How the Case Ran
| Date | Event |
|---|---|
| May 2022 | TerraUSD (UST), which the SEC called an "algorithmic stablecoin," lost its peg to the dollar. UST and its sister tokens fell close to zero. |
| February 16, 2023 | The SEC sued Terraform Labs and Do Kwon in the Southern District of New York. |
| March 2023 | Kwon was arrested in Montenegro while traveling on a false passport. |
| December 28, 2023 | The court found Terraform and Kwon liable for unregistered offers and sales of crypto asset securities. |
| January 21, 2024 | Terraform filed for Chapter 11 in Delaware. |
| April 5, 2024 | A jury unanimously found Terraform and Kwon liable for securities fraud. |
| June 13, 2024 | Terraform and Kwon agreed to pay more than $4.5 billion. |
| December 31, 2024 | Kwon was extradited to the United States. |
| August 12, 2025 | Kwon pleaded guilty to conspiracy to commit commodities fraud, securities fraud, and wire fraud, and to one count of wire fraud. |
| December 11, 2025 | Kwon was sentenced to 15 years in prison. |
The SEC's complaint alleged that Terraform marketed UST as paying as much as 20% interest through the Anchor Protocol, and that it misled investors by claiming a popular Korean mobile payment app used the Terra blockchain to settle transactions.
What Each Defendant Owes
| Item | Terraform Labs | Do Kwon |
|---|---|---|
| Disgorgement | $3,586,875,883 | $110,000,000 |
| Prejudgment interest | $466,952,423 | $14,320,196 |
| Civil penalty | $420,000,000 | $80,000,000 |
| Total | $4,473,828,306 | $204,320,196 |
The totals are our arithmetic from the SEC's figures. Kwon's disgorgement and interest are joint and several with Terraform, so the two totals overlap and the combined figure isn't a simple sum. The judgment also imposed an officer-and-director bar on Kwon.
Terraform agreed to stop selling crypto asset securities, wind down its operations, replace two directors, and distribute its remaining assets "to investor victims and creditors through a liquidation plan," subject to approval in its bankruptcy case. In its fiscal 2024 enforcement results, the SEC described the Terraform remedy as the highest it had obtained after a trial.
The Criminal Case
The Justice Department's case ran separately in the same district. Kwon agreed to forfeit more than $19 million as part of his plea. At sentencing, the U.S. Attorney's Office for the Southern District of New York cited more than $40 billion in investor losses, and thanked the SEC for its earlier civil case.
Why This Case Survived the 2025 Reset
The SEC dismissed seven crypto cases in 2025, Coinbase and Binance among them. Terraform wasn't on the list. By then it was a final judgment, and the core finding was fraud, which a jury decided on the evidence.
The SEC's later stablecoin guidance points the same way. In April 2025, Corporation Finance staff said that certain stablecoins aren't securities, but only stablecoins "backed by assets held in a reserve that are considered low-risk and readily liquid." The statement expressly takes no view on algorithmic stablecoins, the category UST belonged to.
For a broker-dealer, the lesson isn't the one the first version of this post drew. The cases dropped in 2025 rested mainly on registration claims, and those didn't last through a change of leadership. The fraud finding did, because it was about what Terraform told investors. If your firm is deciding whether to hold or facilitate a token, the issuer's claims about how the token works are the part to verify. Our post on how the SEC's approach to crypto changed covers the rest of the 2025 and 2026 shift.
This post is for informational purposes only and does not constitute legal advice. For guidance on specific regulatory obligations, consult your counsel or compliance advisor.