As a researcher with a background in finance and cryptocurrency, I strongly believe that the SEC’s settlement request towards Terraform Labs and its founder Do Kwon is unreasonable and excessive. The proposed penalty and disgorgement fee of $4.47 billion is disproportionate to the alleged offense, which is not even classified as a securities fraud in the traditional sense.
Ripple Labs Inc., a leading player in the blockchain payment sector, has spoken out in favor of Terraform Labs, urging the court to reconsider the SEC’s proposed penalty in their ongoing case.
Ripple Describes SEC Settlement Request as Unreasonable
On June 12, the Securities and Exchange Commission (SEC) sought from Terraform and its founder Do Kwon a total of $3.90 billion: $3.58 billion in disgorgement and a civil penalty of $420 million.
The overall payment, which totals $4.47 billion, was proposed as a resolution in response to allegations that Kwon and his previous business had misled investors regarding their cryptocurrency offerings. In the end, these false representations cost investors approximately $40 billion of their assets due to Kwon’s lack of honesty.
The court ruled that Terraform Labs and Kwon were responsible for deliberately and carelessly masterminding one of the most significant securities fraud cases in US history.
Despite the SEC’s settlement demand amounting to just 1.27% of Terraform’s $33 billion total sales, this proposal appears unreasonable. In support of their argument, Ripple submitted a notice of supplemental authority, drawing attention to instances where the SEC had previously requested significantly smaller settlements in more severe cases.
Based on information from the cryptocurrency payment company, the majority of civil penalties imposed by the Commission fall between 0.6% and 1.8%. The most severe penalty amounting to 1.8% represents the most grave and flagrant infringements.
According to Ripple’s perspective, Terraform Labs should be classified under a less severe category based on the current situation. The SEC’s proposed penalty seems excessive compared to historical precedents, a view shared by many market experts. There have been no accusations of fraud against Terraform Labs, and institutional investors did not sustain significant financial losses in this case.
Terraform Labs Settlement Should Not Exceed $10 Million
According to Terraform Labs, the proposed penalty and disgorgement fee should be no more than $10 million. However, given that the company’s balance sheet reveals assets worth only $75 million in management, it seems an excessive fee for this financially strained firm, which is currently bankrupt.
As a crypto investor, I can’t help but express my disappointment with the Commission’s demand for a hefty settlement fee from Terraform Labs and Do Kwon. In my opinion, the effectiveness of such a settlement is questionable, especially when it comes to providing real solutions for Terraform’s affected victims. Personally, I believe that $7 million is an adequate fee to cover the costs involved.
As a legal analyst, I’d like to point out that the resolution of this ongoing process could have significant implications for other SEC-related lawsuits, such as the one involving Ripple, which has been ongoing for nearly three years.
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2024-06-14 01:59