The US regulatory authorities are aiming to impose a penalty of $5.3 billion on Terraform Labs and its founder, Do Kwon, in the wake of a court decision in a civil lawsuit against them.
Based on a court filing made on April 19, 2023 with the Southern District of New York, the Securities and Exchange Commission (SEC) is seeking for Kwon and Terraform Labs to compensate $4.7 billion in returns and pre-judgment interest.
The Defendants have failed to express regret for their actions, and it is clear that further misconduct may be ongoing as the likelihood of additional violations is significant.
The SEC is proposing additional penalties totaling $424.7 million – $420 million for Terraform and $100 million for Kwon – in addition to the $4.7 billion penalty. The requested penalties, according to the SEC, represent a moderate estimate of the wealth generated by Kwon through Terraform’s stablecoin.
Additionally, the Securities and Exchange Commission (SEC) suggests the following actions against Kwon: he would be prohibited from holding any executive or managerial positions in securities companies; and he would be mandated to reveal all of his baking accounts and possessions.
If the suggested solutions and the civil court’s decision are accepted, Terraform will additionally face an “injunction for conducting behavior” from the court to prevent future misconduct.
Terraform Labs and its founder Do Kwon have disputed the SEC’s proposed fines. The company has suggested a max penalty of $3.5 million, whereas Kwon has advocated for a much lower fine amounting to $800,000.
The filing states, “The Court needs to make it clear that such flagrant misconduct from Defendants, who try to justify their actions by creating new regulations for cryptocurrency markets which contradict federal securities laws, will not be accepted.”
After a court ruling on April 5, the commission announced filings against Terraform and Kwon for deceiving investors regarding the sale of TerraUSD (UST), Luna, and wLUNA through fraudulent means.
In the background, Kwon is now dealing with accusations in Montenegro. He was apprehended in 2023 with a false passport and the process for his extradition has advanced. According to crypto.news, the necessary legal conditions have been satisfied following confirmation by the Podgorica High Court.
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2024-04-24 13:20