SEC Seeks $5.3B Judgment Against Terraform Labs and Do Kwon
The United States Securities and Exchange Commission has filed a motion seeking billions of dollars in disgorgement and civil penalties against Terraform Labs and its co-founder, Do Kwon, following a ruling in the civil suit.
In a lawsuit filed April 19 in the U.S. District Court for the Southern District of New York, the SEC ordered Kwon and Terraform to pay $4.7 billion in disgorgement and prejudgment interest, as well as a total of $520 million in civil penalties — $420 million from Terraform and $100 million from Kwon. The commission, Terraform, and Kwon filed their joint briefs for possible remedies in the civil case, with the Crypto Foundation suggesting a maximum civil penalty of $3.5 million and Kwon only offering $800,000.
In addition to the monetary judgment, the SEC recommended that Kwon not serve as an officer or director of the securities issuer and that he not provide full details of his accounts and assets. If approved, Terraform would have a “conduct-based order” against the company “not to engage in essentially the same conduct that led to the massive fraud.” The proposed settlements and civil judgments have yet to be handed down by a judge.
“The defendants have not shown remorse for their actions, or there is no doubt that further violations are not only unlikely to occur, but likely to occur,” the SEC filing said. “The court must send an unequivocal message to such a disgraceful offense and the defendants' attempts to justify their behavior by setting new rules and standards of behavior for crypto markets in violation of federal securities laws. […] He can't stand it.
On April 5, a jury found Terraform and Quon liable for defrauding investors regarding statements in the offering and sale of TerraUSD (UST), Luna (LUNA) and wLUNA. A Terraform spokesperson said at the time that the company was “weighing in carefully.” [its] Options and Next Steps” Cointelegraph reached out to Terraform regarding the April 19 filing but did not receive a response by press time.
RELATED: Terraform Labs ‘Built On Lies' – SEC On Trial
The SEC trial continued without Kwon, who is currently involved in court proceedings in Montenegro. The founder of Terraform was arrested in March 2023 for using forged travel documents while trying to leave the country.
Although he was later released and allowed to travel to Montenegro, Kwon's extradition requests to the US or South Korea had not been responded to at the time of publication. He faces criminal charges that could be prosecuted in both countries.
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