Terraform Labs Seeks to Sell Subsidiaries to Cover $4.5 Billion SEC Fine
Terraform Labs (TFL), the developer behind the Terra blockchain and the UST and LUNA tokens, is currently exploring options to sell four of its subsidiary companies to cover a $4.5 billion fine. This fine was imposed as part of a settlement agreement with the U.S. Securities and Exchange Commission (SEC) related to fraud allegations.
According to a press release, on July 9th, representatives of TFL announced that the company is seeking buyers for several key assets. The list of assets for sale includes the crypto portfolio tracker Pulsar Finance, the cryptocurrency storage platform Station, the smart contract automation protocol Warp, and the Enterprise platform for managing decentralized autonomous organizations (DAOs). The sales will be facilitated by the investment bank CAVU Securities.
Company representatives stated that the sale of these assets is aimed at maximizing value for creditors and shareholders, as part of a broader strategy to streamline the company’s operations in accordance with the terms of the settlement with the SEC.
Financial and Legal Consequences
Terraform Labs has agreed to pay the fine to settle the legal proceedings related to securities laws violations and fraud accusations. Co-founder and former CEO of the company, Do Kwon, has also agreed to pay $204.3 million as part of the agreement. Kwon is currently in Montenegro, awaiting a decision on his extradition to the U.S. or South Korea, where he faces collective lawsuits related to the collapse of UST and LUNA, resulting in billions of dollars in losses for investors.
Response to the Agreement and Potential Implications for Other Companies
In light of this case, the fintech company Ripple, the developer of the payment protocol and XRP token, used the agreement between TFL and the SEC as an argument to reduce the amount of the fine the regulator requested from Ripple, from $2 billion to $10 million. Ripple emphasizes that XRP investors did not suffer losses, and the company itself, unlike TFL, was not accused of fraud.
The process of selling subsidiary companies and paying fines for Terraform Labs highlights the scale and consequences of legal proceedings in the cryptocurrency space. It also underscores the importance for other cryptocurrency companies to closely monitor changes in the regulatory environment and respond to them to avoid similar problems.
