Terraform Pushes for Lower Fine Amidst SEC’s $5.3B Bid

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As a seasoned crypto investor who has closely followed the developments in the industry, I believe that the proposed $5.3 billion fine against Terraform Labs and its founder Do Kwon is an excessive punishment for the alleged offense. Based on my understanding of the situation, it seems that the SEC’s proposed fine is aimed at sending a strong message against fraudulent activities in the crypto industry. However, I believe that a more reasonable fine would be appropriate, taking into account the specific circumstances of this case and the potential impact on Terraform Labs and its investors.

I, as an observer, note that Terraform Labs and its founder, Do Kwon, are challenging the Securities and Exchange Commission’s (SEC) proposed $5.3 billion penalty. They argue that the fine is unwarranted in light of the accusations against them, which involve allegations of fraudulent activities and unregistered token sales.

Terraform Lawyers: $1M, Not $5.3B

As a researcher examining this situation, I’ve discovered that the Terraform legal team expresses dissatisfaction towards the SEC’s proposed $5.3 billion penalty. In contrast, they advocate for a more fitting fine in the amount of one million dollars.

The SEC intends to impose the biggest penalty in crypto history on Do Kwon and Terraform Labs, following their conviction for fraud by a New York jury last month. This action is meant as a stern warning against deceitful practices within the industry.

Lawsuit Charges And Allegations 

On April 5, following a two-week trial, a jury reached a verdict against Terraform Labs and its CEO Kwon, finding them responsible for defrauding investors in a lawsuit brought forth by the SEC. The case arose from the collapse of TerraUSD stablecoin in 2022, an incident that triggered a chain reaction and resulted in the erasure of approximately $40 billion in market value, leaving lasting consequences on the cryptocurrency market for over a year.

The SEC accused Terraform and Kwon of earning approximately $4 billion through unregistered token transactions, involving LUNA and UST among others, which are considered illicit profits.

SEC’s Proposed Fine

The Securities and Exchange Commission (SEC) proposed a record-breaking fine of $5.3 billion for Kwon and Terraform Labs. This penalty includes around $4.7 billion for disgorgement and prejudgment interest, as well as $100 million and $420 million in civil penalties respectively. The crypto industry’s largest ever fine underscores the intensifying regulatory crackdown by the US SEC. In their court documents, the SEC emphasized their commitment to sending a clear message against such misconduct, making it clear that it will not be tolerated moving forward.

Kwon And Terraform’s Response

The legal team of Terraform opposed the proposed penalties, proposing instead a fine of $1 million without any injunctions or requirements to return profits. Both sides have until May 6th and May 1st, respectively, to present additional arguments for their cases.

Kwon’s legal team contended that the majority of his actions took place outside of the US, specifically in Korea and Singapore, with minimal impact on American soil.

Upcoming Court Proceedings

On April 29, Judge Jed Rakoff set a May 22 court date for attorneys representing the SEC, Kwon, and Terraform Labs to discuss proposed solutions based on the jury verdict. Although all parties have previously submitted filings regarding disgorgement and civil penalties, Judge Rakoff’s order permits further supplements before the hearing.

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2024-05-02 17:06