(Bloomberg) -- Terraform Labs Pte. will pay $4.47 billion to resolve a US Securities and Exchange Commission lawsuit over the firm’s 2022 collapse, which wiped out $40 billion in investor assets and shook the cryptocurrency world.

The SEC on Wednesday asked a federal judge in New York to approve the settlement. The deal was reached after a jury in April found Terrform and co-founder Do Kwon liable for fraud following a two-week civil trial. Kwon still faces a criminal case over the sale of the firm’s UST stablecoin.

Terraform will pay about $3.59 billion plus interest and a $420 million penalty, while Kwon will pay $204.3 million, including $110 million in disgorgement, interest and an $80 million penalty, a court filing showed. Kwon also must transfer at least $204.3 million to the Terraform bankruptcy estate for distribution to investors, and will be barred from serving as an officer or director of a public company, according to the settlement.

Before the deal was reached, the SEC had been asking US District Judge Jed Rakoff to impose a fine of $5.3 billion, while Terraform argued it shouldn’t have to pay because most of its stablecoins were sold overseas.

The resolution also requires Terraform to wind down its business “as soon as possible” and seek approval of a Chapter 11 liquidation plan in its bankruptcy case that replaces company directors, including current Chief Executive Officer Chris Amani, and appoints a trutstee or estate representative to use its remaining assets to pay creditors and investors. 

“The entry of this judgment would ensure the maximal return of funds to harmed investors and put Terraform out of business for good,” the SEC said in a letter to Rakoff.

David Kornblau, a lawyer for Terraform, declined to comment. 

Jurors found Terraform and Kwon liable for fraud for falsely claiming Chai, a popular Korean payment application, was using Terraform’s blockchain technology to make transactions. The jurors also found investors were misled about the stability of the UST stablecoin, which Kwon and Terraform claimed was algorithmically pegged to the US dollar.

Kwon, who owns 92% of Terraform, was arrested in Montenegro in 2023 and convicted there of attempting to travel using a fake passport. Since then, the disgraced former crypto mogul has been caught in an institutional tug-of-war in Montenegro while officials fight over whether he should be extradited to the US or South Korea.

The civil case is US v. Terraform Labs, 23-cv-01346, US District Court, Southern District of New York (Manhattan).

(Updates with details of settlement starting in third paragraph.)

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