The United States Securities and Exchange Commission (SEC) could end up receiving only a small portion of its multibillion-dollar settlement with Terraform Labs.

According to a report by The Wall Street Journal, Terraform had assets worth $430.1 million against liabilities worth $450.9 million in January, when the firm filed for bankruptcy.

Terraform Labs has agreed to pay the securities regulator roughly $4.47 billion as part of a settlement disclosed on June 12. In total, the remedies include disgorgement fines of roughly $3.6 billion, a civil penalty of $420 million and prejudgement interest of nearly $467 million. The settlement is still awaiting court approval.

In bankruptcy, claims are prioritized. Secured creditors typically get paid first, followed by unsecured creditors, which often include fines and penalties owed to government agencies like the SEC. In this case, the SECwould have to wait until lenders and other secured creditors are paid before receiving any funds.

Related: Do Kwon’s extradition to go back to Montenegro High Court after appeal.

In 2023, the agency sued Terraform Labs and its founder, Do Kwon, for selling unregistered securities and defrauding investors as part of the Terra ecosystem collapse. Kwon has been arrested in Montenegro, and the U.S. and South Korea are seeking his extradition.

Despite the low chances of receiving funds, the SEC has reportedly portrayed the settlement as a fair penalty for “one of the largest securities frauds in U.S. history.” The agency said in a letter to U.S. District Judge Jed Rakoff on June 12:

“If approved, the proposed judgment will send an unmistakable deterrent message to not only those who engage in brazen misconduct, but also to all those who seek to evade the requirements of the federal securities laws by crafting new standards of behavior for crypto assets that fall under the purview of the federal securities laws.”

According to the Journal, fines and penalties collected by the agency in 2023 totaled $2.8 billion.

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