US SEC requires Terraform Labs and Do Kwon to pay $5.3 billion in fines

Author: Turner Wright, CoinTelegraph; Compiler: Baishui, Golden Finance

The U.S. Securities and Exchange Commission (SEC) filed a motion after the civil case was decided, demanding billions of dollars in disgorgement and civil penalties from Terraform Labs and its co-founder Do Kwon.

In a document filed with the U.S. District Court for the Southern District of New York on April 19, the SEC asked Kwon and Terraform to pay approximately $4.7 billion in disgorgement and prejudgment interest after the civil case was decided, as well as a total of $520 million in civil penalties - $420 million from Terraform and $100 million from Kwon.The Commission, Terraform, and Kwon simultaneously filed briefs on possible remedies in the civil case, with the crypto company arguing for a maximum civil penalty of $3.5 million, while Kwon only considered a fine of $800,000.

Source: Courtlistener

In addition to the fine, the SEC is proposing to ban Kwon from serving as an officer or director of a securities issuer and from providing full details of his accounts and assets. If approved, Terraform would also impose a "conduct-based injunction" on the company to prevent it from "engaging in conduct substantially the same as that which led to the massive fraud." The proposed remedies and civil judgment have yet to be decided by a judge.

“The defendants have demonstrated no remorse for their conduct and have left them in a position where there is no doubt that additional violations are not only possible but likely to have occurred,” the SEC filing states. “The court should send a clear message that this kind of brazen misconduct, and the defendants’ misguided attempts to justify their actions by creating new rules and standards of conduct for crypto markets that violate the federal securities laws… will not be tolerated.”

On April 5, a jury found Terraform and Kwon responsible for deceiving investors in their offer and sales statements for TerraUSD (UST), Luna, and wLUNA. A Terraform spokesperson said at the time that the company was “carefully weighing [its] options and next steps.”

The SEC trial continues without Kwon, who is currently embroiled in court proceedings in Montenegro. Terraform co-founder Kwon was arrested in March 2023 for using a forged travel document while trying to leave the country.

Though he was later released and allowed to travel within Montenegro, the question of whether Kwon would be extradited to the United States or South Korea, where he faces potential criminal charges, remained unanswered at the time of publication.