As an analyst with extensive experience in the crypto industry, I find the situation surrounding Terraform Labs’ $4.5 billion SEC settlement highly questionable. The skepticism raised by various industry figures such as Ki Young Ju, Paul Grewal, and David Hoffman is not unwarranted.
In a significant declaration on Wednesday, Terraform Labs revealed their intention to cover approximately $4.5 billion in charges to resolve the SEC legal action. Yet, some members of the cryptocurrency community express skepticism towards Terraform Labs’ ability to pay such an enormous amount, given their reported assets under management worth just $75 million.
From Where Will Terraform Labs Bring $4.5 Billion?
As an analyst, I’ve been closely following the cryptocurrency market and came across a noteworthy observation made by CryptoQuant founder Ki Young Ju. He raised some concerns regarding a large Bitcoin settlement worth approximately 64,824 coins, executed by Terraform Labs. While expressing his doubts, Ki Young Ju questioned whether this significant amount was indeed used to restore the UST peg. Suspicion over the transaction was evident in his statement.
Ki Young Ju raised questions on X platform about the source of the money used in the restoration process, expressing skepticism over the $4.47 billion cash-out if Terraform’s market cap was only $40 billion. He also questioned whether Do Kwon or Terraform Labs had such a large financial reserves. Additionally, Paul Grewal of Coinbase cast doubt on the SEC settlement related to this matter.
As a researcher, I’ve discovered that Terraform Labs currently manage assets valued at around $75 million from wallets that have been publicly identified. However, there is a significant discrepancy between this known amount and their stated total assets of approximately $3.825 billion. So, the pressing question arises: where could the remaining $3.75 billion be located?
As a researcher investigating Terraform’s financial situation, I came across an intriguing finding: Terraform’s publicly disclosed assets amount to approximately $75 million in their known wallets. However, there is a substantial discrepancy between this figure and the $3.75 billion fine imposed by the Securities and Exchange Commission (SEC) against them. To clarify, how does this significant financial gap come into existence?
— MartyParty (@martypartymusic) June 12, 2024
David Hoffman, the co-founder of Bankless and Ethereum contributor expressed: “If Terraform Labs truly holds $4.5 billion in assets… and if those assets are not redistributed to the affected users as a penalty, but instead go to the U.S. Securities and Exchange Commission, this situation could become an unprecedented display of misuse of authority in our lifetimes.”
What’s the Truth Behind the $4.5 Billion SEC Settlement?
Under the present arrangement with Terraform Labs, the disgorged amount goes to the bankruptcy estate rather than being paid directly to the Securities and Exchange Commission (SEC). The judgment entails a disgorgement penalty of $4.05 billion, along with accrued interest and an additional civil fine of $420 million.
Given that Terra filed for bankruptcy in January, it’s uncertain how much of the overall settlement they will be able to cover. Instead, any unpaid portions will be classified as unsecured claims during the Chapter 11 reorganization procedure.
As a financial analyst, I’d rephrase that statement like this: Do Kwon, the founder of Terra, has consented to a prohibition against cryptocurrency transactions and has pledged to transfer an amount totaling $204 million to the bankruptcy estate of Terraform.
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2024-06-13 09:54