SEC Seeks Billions in Penalties from Terraform Labs and Do Kwon

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The United States Securities and Exchange Commission (SEC) has filed a motion requesting billions of dollars in disgorgement and civil penalties against Terraform Labs and its co-founder, Do Kwon, following a verdict in its civil case.

In an April 19 filing in the United States District Court for the Southern District of New York, the SEC requested approximately $4.7 billion in disgorgement and prejudgment interest after the civil case ruling, along with a combined $520 million in civil penalties—$420 million from Terraform and $100 million from Kwon. 

SEC vs. Terraform Labs, and Do Kwon

While Terraform suggested a maximum civil penalty of $3.5 million and Kwon proposed only $800,000, the SEC argued for significantly higher penalties.

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In addition to the monetary judgment, the SEC proposed barring Kwon from serving as an officer or director of a securities issuer and providing complete details of his accounts and assets. Terraform would also face a “conduct-based injunction” to prevent engaging in behavior similar to the fraud that occurred.

The proposed remedies and civil judgment are pending approval by a judge. As reported earlier by TheCoinRise, the SEC stated that Terraform Labs was “built on lies.” 

SEC Not Satisfied with the Defendants’ Conduct

The SEC filing expressed dissatisfaction with the defendants’ conduct, stating, 

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“Defendants have not shown remorse for their conduct, nor can there be any doubt that they are in a position where additional violations are not only possible but likely are already occurring.”

The SEC emphasized the need to send a clear message that such misconduct will not be tolerated.

Defrauding Investors

The case against Terraform and Kwon stemmed from allegations of defrauding investors regarding statements over the offer and sale of TerraUSD (UST), Luna (LUNA), and wLUNA.

Following the jury’s verdict on April 5, a Terraform spokesperson stated that the firm was “carefully weighing [its] options and next steps.”

Notably, the SEC trial proceeded without Kwon’s presence, as he is currently involved in court proceedings in Montenegro. 

Kwon’s Arrest

Kwon was arrested in March 2023 for using falsified travel documents while attempting to leave the country. Although he was later released and allowed to travel within Montenegro, the question of his extradition to either the U.S. or South Korea remains unanswered. Kwon faces potential criminal charges in both countries.

As of now, Terraform Labs and Do Kwon are navigating the legal proceedings amidst significant regulatory challenges, with the SEC seeking substantial penalties in response to the alleged misconduct.

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