Terraform Labs and Do Kwon to Pay $5.3B in the Case against SEC

In the wake of Terraform Labs and Do Kwon being found guilty of fraud by a jury in their case with the United States Securities and Exchange Commission (SEC), the commission has taken legal action to seek $5.3 billion in disgorgement and civil penalties.

The SEC recently filed a motion with the U.S. District Court for the Southern District of New York, requesting that Terraform Labs and its co-founder, Do Kwon, pay approximately $4.7 billion in disgorgement and prejudgment interest as a consequence of the verdict in the civil case.

In addition, the commission is pursuing a combined total of $520 million in civil penalties, with $420 million sought from Terraform and $100 million from Kwon. Both Terraform and Kwon, along with the SEC, have submitted their arguments for potential remedies in the civil case concurrently.

Interestingly, Terraform has proposed a maximum civil penalty of $3.5 million, while Kwon has suggested only $800,000.

Aside from the financial judgment, the SEC has recommended that Kwon be barred from serving as an officer or director of a securities issuer and be required to disclose full details of his accounts and assets.

If approved, Terraform would be subject to a conduct-based injunction to prevent them from engaging in similar fraudulent activities.

However, it is important to note that these proposed remedies and civil judgment are still pending determination by a judge.

In its filing, the SEC expressed that the defendants have shown no remorse for their actions and emphasized the importance of the court sending a clear message that such misconduct and attempts to establish new standards for crypto markets in violation of federal securities laws will not be tolerated.

On April 5, a jury found Terraform and Kwon guilty of defrauding investors through false statements concerning the offer and sale of TerraUSD (UST), Luna (LUNA), and wLUNA.

As of now, Terraform has not issued a response regarding the recent filing.

During the SEC trial, Kwon was absent as he is currently involved in legal proceedings in Montenegro.

In March 2023, Kwon was arrested for using forged travel documents while attempting to leave the country.

Although he has since been released and allowed to travel within Montenegro, it remains uncertain whether Kwon will be extradited to the U.S. or South Korea, as both countries have potential criminal charges against him.