Legal representatives for Terraform Labs and its founder, Do Kwon, are advocating for a significantly reduced fine of $1 million, contesting the United States Securities and Exchange Commission (SEC)’s proposed penalty of $5.3 billion. This development follows the SEC’s findings of liability against the crypto company and its founder for fraud associated with the Terra-Luna market crash that occurred in early April.
The recent court filing, issued on Thursday, marks a pivotal moment in the ongoing legal proceedings. It represents Terraform Labs and Do Kwon’s concerted effort to challenge the SEC’s proposed penalty, which includes a disgorgement of $4.7 billion and prejudgment interest, along with a total of $520 million in civil penalties, attributed to their alleged involvement in the Terra-Luna collapse.
The SEC’s formidable demands underscore the severity of the allegations and the significant financial ramifications at stake for Terraform Labs and its founder. However, with their legal team now actively contesting the proposed penalties, the case enters a critical phase where the courts will ultimately determine the outcome of this high-profile dispute.
Terraform Labs and its founder, Do Kwon, resist hefty fines totaling billions.
JUST IN: DO KWON'S LAWYERS SAY FINE SHOULD BE CLOSER TO $1 MILLION AFTER SEC DEMANDS $5.3 BILLION
— BSCN Headlines (@BSCNheadlines) April 30, 2024
In their legal defense, attorneys representing Do Kwon and Terraform Labs contended that the court should consider imposing a civil penalty of no more than $1 million against the blockchain platform. The crux of their argument rests on the assertion that the Securities and Exchange Commission (SEC) has not provided sufficient evidence to justify the extensive injunction and monetary sanctions it is pursuing against Terraform Labs (TFL).
The court filing underscores the legal team’s stance that the SEC’s demands for punitive measures are disproportionate to the alleged violations attributed to Terraform Labs. Furthermore, it emphasizes the necessity for a fair and balanced approach to imposing penalties, one that takes into account the specific circumstances of the case and the extent of wrongdoing, if any, on the part of the defendants.
By advocating for a nominal civil penalty of $1 million, Kwon and Terraform Labs’ legal representatives seek to mitigate the potential adverse impact of the SEC’s proposed sanctions while emphasizing their commitment to addressing any legitimate concerns raised by the regulatory authority. Ultimately, the court’s decision will determine the appropriate course of action and the magnitude of the penalties, weighing the arguments presented by both parties against the backdrop of legal precedent and regulatory considerations.
Following the Terra-Luna crash, the SEC targets Kwon.
In February 2023, the SEC initially filed charges against the crypto mogul, who has since fallen from grace. The charges stemmed from the simultaneous crash of TerraUSD and its counterpart Luna, algorithmic stablecoins, which occurred in spring 2022 and resulted in an estimated $40 billion loss in the cryptocurrency market.
🚨Breaking 🚨
‼️SEC moves for final judgment‼️
Terraform Labs & Do Kwon asked to pay $5.3 billion, including disgorgement & interest.
Verdict follows guilty verdict on all counts. #SEC #TerraformLabs" pic.twitter.com/iVmq7973Jk
— RK Gupta (EarnWithRK) (@earnwithrk) April 25, 2024
Kwon, found liable by a jury trial on April 5, was notably absent during the proceedings. Instead, Terraform Labs’ founder remained detained in Montenegro, having allegedly utilized a fraudulent passport in an attempt to evade accountability for the aftermath of the crash.
Following the verdict, Gurbir S. Grewal, Director of Enforcement at the SEC, emphasized the tangible repercussions of non-compliance within the cryptocurrency realm. He remarked, “Despite the promises of the crypto industry, the absence of registration and adherence to regulations carries significant consequences for individuals. As evidenced by the diligent efforts of our team, we remain steadfast in utilizing all available mechanisms to safeguard investors. However, it is imperative for the cryptocurrency markets to align with regulatory standards.”
The reason behind the absence of the Terraform Labs founder from his own trial.
Amidst the ongoing legal proceedings, Kwon finds himself in a precarious position, with his fate hanging in the balance as both the United States and his native South Korea vie for his extradition. His legal team is actively advocating for his release to South Korea, where they anticipate a potentially more lenient punishment awaits him.
The landscape of cryptocurrency regulation has seen a marked increase in enforcement actions by regulatory authorities, with the SEC spearheading aggressive measures against liable crypto companies. Notable examples include the imposition of a nearly $2 billion fine against Ripple Labs and a staggering $4.3 billion penalty levied on the once-leading crypto exchange, Binance.
As the legal saga unfolds, the ultimate outcome for Kwon and his crypto company remains uncertain. The possibility of facing substantial fines or additional charges in the United States looms large, adding further complexity to an already convoluted legal battle. The resolution of Kwon’s extradition proceedings and the subsequent legal actions will undoubtedly shape the future trajectory of both the individual and the cryptocurrency company he founded.
READ MORE ABOUT: Terraform Labs strategically leverages Chapter 11 bankruptcy to fund its appeal against the SEC’s fraud lawsuit
