As someone who has closely followed the cryptocurrency market and its regulatory landscape, I believe that the SEC’s decision to seek a record $5.3 billion fine against Do Kwon and Terraform Labs for their role in the collapse of the Terra/LUNA stablecoin sends a strong message about the regulator’s commitment to cracking down on misconduct within the industry.
The Securities and Exchange Commission (SEC) intends to impose a historic penalty of approximately $5.3 billion on Terraform Labs and Do Kwon in relation to the failure of the Terra/LUNA stablecoin, marking a stern response from regulatory authorities against misbehavior within the cryptocurrency sector.
Heavy Penalty for Do Kwon, Terraform
I’ve observed the U.S. Securities and Exchange Commission (SEC) making a significant move against a cryptocurrency project for the first time, proposing a fine of an astounding $5.3 billion. The target of this hefty penalty are Do Kwon and Terraform Labs. The SEC holds them accountable for the failure of the Terra/LUNA stablecoin, which was engineered to maintain parity with the US dollar. This collapse had far-reaching consequences, erasing approximately $40 billion in market value.
Both Entities Found Liable For Fraud
Earlier this month, a New York court found both Kwon and Terraform responsible for civil fraud following a two-week trial. The allegations revolved around Terraform’s failure to disclose risks in their trading scheme and the unrealistic 20% yields provided by their Anchor lending platform. Although Kwon was not present at the trial due to his arrest in Montenegro, where he is currently awaiting extradition, the court still rendered a decision against him and Terraform.
SEC’s Claims
I’ve observed that according to the Securities and Exchange Commission (SEC), Kwon and Terraform are accused of generating over $4 billion through unregistered token sales, involving LUNA and UST among others. In a filing made to the Southern District Court of New York on April 19, the SEC underscored the importance of taking a firm stand against such misconduct. They aim to prohibit Kwon permanently from holding any officer or director role and request a detailed inventory of his assets, sworn under oath.
The SEC said such measures were necessary to deter future violations, saying,
“The defendants have failed to express regret for their actions, and it’s clear that they have the ability and potential to commit further infractions.”
Proposed Fine
The proposed penalty consists of a $4.2 billion penalty for relinquishing gains, a $545 million interest payment prior to judgment, and civil penalties amounting to $420 million for Terraform and $100 million for Kwon.
As an assistant observing this situation, I’d put it as follows: The fine being suggested by the SEC is unlike anything we’ve seen before, indicating a strong and determined approach. It aligns with the proposed penalty of $1.8 billion for Ripple, and would even surpass the $4.3 billion settlement reached between Binance Holdings Ltd. and the SEC for charges related to anti-money laundering and US sanctions violations.
Legal Challenges
I have observed that lawyers representing both Kwon and Terraform Labs have put forth a strong argument against the SEC’s allegations, contending that the token sales transpired outside the United States and therefore did not infringe upon federal securities law. Initially raising doubts about US jurisdiction, they now aim to cap the fines at $3.5 million for Terraform Labs and a more modest $1 million for Kwon’s defense.
I’ve noticed that the hefty fine imposed is a clear reflection of the unyielding position taken by the SEC. With their recent proposed penalty of $1.8 billion for Ripple looming, this figure underscores the regulatory body’s firm stance. This potential fine surpasses the historic $4.3 billion settlement reached between Binance Holdings Ltd. and the US Department of Justice in November 2023, making it one of the largest corporate agreements in American history.
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2024-04-25 17:10