After a jury found Terraform Labs and Do Kwon liable for fraud in its long-standing case with the U.S. Securities and Exchange Commission (SEC), the regulator has asked a New York court to impose $5.3 billion in disgorgement and civil penalties.
SEC Notches Win As Jury Finds Do Kwon Liable For Multi-Billion Dollar Fraud
After Do Kwon’s Terra empire collapsed in May 2022, over $40 billion worth of investor money was wiped out in a matter of days. A Manhattan jury found Kwon — and his company Terraform Labs — liable on civil fraud charges related to misleading investors about the safety of investing in Terra’s algorithmic stablecoin, Terra USD (UST), and its companion token LUNA.
According to the SEC’s motion filed just two weeks after the civil trial was concluded, the jury issued a verdict in favor of the agency in all counts. The SEC now wants Kwon and Terraform Labs to pay $4.74 billion in disgorgement and prejudgment interest, as well as a collective $520 million in civil penalties: $420 million from Terraform Labs and $100 million from Kwon. The securities regulator claimed the fine amount was “conservative” but a “reasonable approximation” of Terraform and Kwon’s “ill-gotten gains.
In addition to the gargantuan monetary judgment, the SEC has also asked the judge for injunctions barring Kwon and Terraform Labs from engaging in further securities violations.
“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 wrote in the filing. “The Court should send an unequivocal message that this sort of brazen misconduct, and Defendants’ misbegotten attempt to excuse their behavior by crafting new rules and standards of behavior for crypto markets in contravention of the federal securities laws […] will not be tolerated.”
Do Kwon And Terraform Labs Push Back Against SEC
Do Kwon and Terraform Labs have contested the SEC’s penalty suggestion.
Terraform Labs lawyers filed a response the same day as the SEC’s motion, stating that the court should not approve the proposed injunctive relief or disgorgement against it. The company requests the court to grant only an “appropriate civil penalty” per violation that the regulator can prove happened in the United States.
Kwon’s attorneys also fought against the injunctive relief sought by the SEC, claiming it is not warranted because he is not currently employed and has pending criminal charges against him. They further asserted that the fallen crypto star has “no illegal profits … to disgorge.”
Kwon is currently mired in court proceedings in Montenegro, where he was arrested in March 2023 for attempting to flee to Dubai using forged travel documents. Though later released after serving his four-month prison sentence, it’s still unknown whether he will be extradited to the U.S. or his native South Korea. Kwon faces criminal charges in both jurisdictions.
Source: https://zycrypto.com/sec-asks-judge-to-fine-terraform-labs-and-do-kwon-5-3-billion-in-fraud-case/