Key takeaways:
- The US SEC has filed a motion against Terraform Labs and its co-founder, Do Kwon, seeking billions of dollars in disgorgement and civil penalties.
- Terraform, Kwon, and the commission all simultaneously submitted briefs on possible resolutions in the civil case.
In response to a ruling in its civil case, the US Securities and Exchange Commission (SEC) has moved to impose civil fines and disgorgement of billions of dollars on Do Kwon and Terraform Labs.
The SEC filed a motion on April 19 in the US District Court for the Southern District of New York, requesting that Kwon and Terraform pay $520 million in civil penalties ($420 million from Terraform and $100 million from Kwon) in addition to roughly $4.7 billion in disgorgement and prejudgment interest following the civil case ruling.
Terraform, Kwon, and the commission all simultaneously submitted briefs on possible resolutions in the civil case. The crypto company suggested a maximum civil penalty of $3.5 million, while Kwon only offered $800,000.
Apart from the monetary award, the SEC suggested that Kwon be prohibited from holding any position as an officer or director of a securities issuer and that all of his assets and accounts be disclosed.
If approved, Terraform would also be subject to a “conduct-based injunction” that would prohibit the company from carrying out nearly the exact same actions that resulted in the significant fraud. A judge has not yet made a decision regarding the suggested remedies and civil judgment. According to the SEC filing:
“Defendants have not shown remorse for their conduct, nor can there be any doubt that they are in position where additional violations are not only possible but likely are already occurring,”
Terraform and Kwon were found guilty by a jury on April 5 of misleading investors about their proposal and sales of TerraUSD (UST), Luna, and wLUNA. The company is carefully considering its options and next moves, according to a representative for Terraform.
Kwon, who is currently engaged in legal processes in Montenegro, was not present during the SEC trial. The co-founder of Terraform was detained in March 2023 when he tried to flee his country using forged travel documents.
The matter of Kwon’s extradition to the US or South Korea remains unanswered despite his eventual freedom and permission to travel inside Montenegro. He could be charged with a crime in either country.
