The United States Securities and Exchange Commission (SEC) has filed a motion seeking billions of dollars in disgorgement and civil penalties against Terraform Labs and its co-founder, Do Kwon, following a verdict in its civil case.
In a filing made on April 19 in the U.S. District Court for the Southern District of New York, the SEC asked Kwon and Terraform to pay around $4.7 billion in disgorgement and prejudgment interest after the civil case ruling, along with a combined $520 million in civil penalties — $420 million from Terraform and $100 million from Kwon. While the commission, Terraform, and Kwon all submitted their briefs for potential remedies in the civil case simultaneously, with the crypto firm suggesting a maximum civil penalty of $3.5 million and Kwon proposing only $800,000.
The SEC also proposed prohibiting Kwon from serving as an officer or director of a securities issuer and requiring him to provide full details of his accounts and assets. If approved, Terraform would also be subject to a “conduct-based injunction” to prevent “engaging in essentially the same behaviour that led to the massive fraud.” The proposed remedies and civil judgement are yet to be decided by a judge.
The SEC filing stated, “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 already occurring.” It further emphasised that the court should send a clear message that such misconduct, along with the attempt to justify it by crafting new rules for crypto markets, will not be tolerated.
On April 5, a jury found Terraform and Kwon liable for defrauding investors concerning statements made about the offer and sale of TerraUSD (UST), Luna, and wLUNA. A Terraform spokesperson mentioned that the firm was “carefully weighing [its] options and next steps.” Cointelegraph reached out to Terraform regarding the April 19 filing but did not receive a response at the time of publication.
Kwon did not participate in the SEC trial, as he is currently involved in legal proceedings in Montenegro. He was arrested in March 2023 for using falsified travel documents while attempting to leave the country.
Although he was later released and allowed to travel within Montenegro, it is uncertain whether Kwon will be extradited to the U.S. or South Korea. He faces potential criminal charges in both countries.
