The SEC is asking for $5.2 billion in penalties from Terraform Labs and Do Kwon for fraud. There are conflicting opinions on the suggested fines.
The SEC is seeking $5.2 billion in penalties from Terraform Labs and Do Kwon for crypto fraud. Terraform proposes $3.5 million, while Kwon suggests $800,000, both opposing the SEC’s penalty. The jury has found Terraform and Kwon liable for defrauding investors in crypto offerings.
SEC Seeks Substantial Penalties Against Terraform Labs and Do Kwon
The United States Securities and Exchange Commission (SEC) is pursuing significant monetary penalties against Terraform Labs and its co-founder, Do Kwon, in light of a civil case verdict. The SEC, in an April 19 filing in the U.S. District Court of New York in the Southern District of New York, demands approximately $4.7 billion in disgorgement and prejudgment interest, alongside $520 million in civil penalties. Terraform is expected to provide $520 million, with Kwon contributing $100 million.
However, Terraform and Kwon hold differing views on the imposition of penalties. The crypto firm proposed a maximum civil penalty of $3.5 million, a suggestion that Kwon strongly opposed. Instead, Kwon argued for a significantly lower amount of $800,000. Alongside the financial judgment, the SEC recommended disqualifying Kwon from holding positions as an officer or director of a security issuer, and ensuring full disclosure of banking accounts and assets. Additionally, the SEC aims to impose a “conduct-based injunction” on Terraform to prevent any recurrence of similar misconduct in the future.
SEC Emphasizes Lack of Remorse in Terraform Labs Case
In its filing, the SEC underscored the defendants’ apparent lack of remorse for their actions and the potential for future violations. The commission stated that “Defendants have not shown remorse for their conduct, nor can there be any doubt that they are in the position where additional violations are not only possible but likely are already occurring.” The SEC emphasized the importance of sending a clear message to deter similar misconduct, especially concerning attempts to justify actions through new standards in crypto markets, which contradict federal securities laws.
The proposed remedies and civil judgment await approval by a judge. This development follows a jury’s verdict on April 5, which found Terraform and Kwon liable for defrauding investors regarding statements related to the offer and sale of TerraUSD (UST), Luna, and wLUNA. A Terraform spokesperson previously mentioned that the firm was “carefully weighing [its] options and next steps.”
Civil Action Against Terraform Labs and Do Kwon
The civil action against Terraform Labs and Do Kwon stems from their involvement in fraudulent issuance and the alleged selling of TerraUSD (UST), Luna, and wLUNA.
On April 5, the jury concluded that both Terra and Kwon managers were culpable for deceiving investors by deliberately disseminating false information. Subsequently, the SEC filed a motion for disgorgement and civil penalties to address the financial consequences of the fraudulent activities.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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