SEC Seeks $5.2B Penalties from Terraform and Do Kwon

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The SEC, which is the securities regulatory body in the United States, intends to levy significant fines against Terraform Labs and its founder Do Kwon, following a decision in a civil lawsuit. In a court filing dated April 19, 2023, in the Southern District of New York, the SEC requests that approximately $4.7 billion be returned as restitution and interest, along with a civil penalty of $520 million for Terraform Labs. Additionally, Do Kwon is expected to pay a civil penalty of $100 million.

Despite having contrasting perspectives, Terraform proposed a maximum civil penalty of $3.5 million for the infringement, while Kwon advocated for a significantly lower penalty of $800,000. In addition to the financial sanction, the SEC suggested other measures: disqualifying Kwon from serving as an officer or director of any security issuer; requiring full disclosure of banking accounts and assets; and imposing a “conduct-based injunction” on Terraform to prevent any future misconduct.

Terraform, Kwon Found Liable for Investor Fraud

In their filing with the SEC, it was made clear that the defendants had not expressed regret for their past actions and that there was a risk of further rule-breaking. The commission strongly emphasized that remorse was lacking, and that the circumstances indicated a high probability of ongoing violations. To set an example and discourage similar misconduct, particularly in the crypto market where new justifications for noncompliance with securities laws may arise, the SEC underscored the importance of adhering to federal securities regulations.

The proposed solutions and court decisions are still under review by a judge. This occurs after a jury ruled on April 5 that Terraform and Kwon were responsible for deceiving investors regarding statements about TerraUSD (UST), Luna, and wLUNA’s offer and sale. A Terraform representative had previously mentioned that the company was considering its choices carefully before taking further action.

Terraform and Do Kwon Found Liable for Defrauding Investors

A civil lawsuit accuses Terraform Labs and Do Kwon of fraudulently issuing securities and selling TerraUSD (UST), Luna, and wLUNA tokens. On April 5, the jury determined that both Terra and Kwon had misled investors by knowingly spreading false information. The Securities and Exchange Commission (SEC) subsequently filed a motion to recover losses and levy fines as a result of the deceitful actions.

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2024-04-23 03:31