Key takeaways:
- Terraform’s lawyers emphasized the absence of evidence regarding UST stablecoin sales in the U.S
- Kwon’s legal team argues against granting any injunctive relief or disgorgement
Terraform Labs, a prominent player in the cryptocurrency space, is contesting the United States Securities and Exchange Commission’s (SEC) proposed remedies following a federal jury’s verdict finding them liable for defrauding crypto investors.
The SEC is seeking a staggering $5.3 billion in disgorgement, interest, and civil penalties from Terraform and its co-founder Do Kwon, marking it as the largest-ever penalty sought by the SEC against a cryptocurrency firm.
The legal battle intensified as Terraform’s lawyers argued against the SEC’s jurisdiction and the lack of substantial evidence linking the alleged misconduct to significant losses.
They contend that most token sales occurred outside the US, beyond the SEC’s regulatory reach. Additionally, Kwon’s legal team emphasized that his involvement with Terraform was primarily abroad, in Korea and Singapore, challenging the SEC’s assertion of significant impact within the United States.
The SEC cited Terraform’s partnership deal with the baseball team Nationals Park as evidence of its intent to establish a presence in the US. However, Terraform dismissed this as insignificant, stating that displaying their logo at a baseball stadium did not have a substantial effect within the US.
The contentious legal battle comes amidst Terraform’s previous assertion that a $1 million civil penalty would be more appropriate than the SEC’s multibillion-dollar proposal.
Terraform’s legal team proposed a $1 million penalty in court documents, highlighting the substantial disparity between this figure and the SEC’s $5.3 billion demand, underscoring the significant disagreement regarding Terraform’s alleged wrongdoing. They argued against granting injunctive relief or disgorgement, advocating for a maximum $1 million civil penalty against Terraform Labs.
Both sides are set to present arguments before Judge Jed Rakoff on May 22nd, although Kwon’s participation remains uncertain due to ongoing extradition proceedings in Montenegro related to separate criminal charges linked to Terraform’s collapse.
