Library · Crypto, word by word · Events and incidents
What was the Terra (LUNA and UST) collapse?
Terra's stablecoin UST lost its dollar peg in May 2022, and its sister token LUNA collapsed with it. In 2024 a US jury found Terraform Labs and its founder Do Kwon liable for fraud; they agreed to pay more than $4.5 billion, and the company wound down.
What it means for you
A stablecoin backed by its own sister token rather than by reserves can lose its peg and fail to recover. The word stable in the name is a design goal, not a guarantee.
How it works
The SEC says a jury unanimously found Terraform and Kwon liable for a years-long fraud involving crypto asset securities. The court approved a final judgment on June 12, 2024: Terraform owes about $4.47 billion and Kwon $204 million. Terraform agreed to stop selling its tokens, wind down, and distribute its remaining assets to investors and creditors.
Source: SEC: Terraform and Kwon to pay $4.5 billion following fraud verdict (2024-73) · checked 5 October 2026
Related words
Educational content, not financial advice. Written by hand and checked against the source named above. Something wrong? Tell us and we reply within two business days.