Terraform Labs and its founder, Do Kwon, are contesting the SEC's proposed $5.3 billion fine, labeling it unjustified, following allegations of fraud and unregistered token sales.
Terraform Lawyers: $1M, Not $5.3B
The Terraform legal team is not happy with the SEC’s proposed $5.3 billion fine. The team representing the company and its founder, Do Kwon, has instead stated that a million-dollar fine would be more appropriate for the situation.
This statement follows the SEC’s proposal to level the highest fine in the crypto industry against Do Kwon and Terraform Labs. The move is intended to send a strong message against fraudulent activities in the industry after a New York jury found the two entities liable for fraud last month.
Lawsuit Charges And Allegations
On April 5, a jury found Terraform Labs and Kwon liable for defrauding investors after a two-week trial with the SEC. The lawsuit stemmed from the collapse of TerraUSD stablecoin that created a domino effect and subsequently wiped out $40 billion in market value in 2022, causing significant repercussions in the cryptocurrency market for the next year.
The SEC further alleged that Terraform and Kwon made over $4 billion in "ill-gotten gains" from unregistered token sales, including LUNA and UST.
SEC’s Proposed Fine
The SEC proposed a fine totaling $5.3 billion, with approximately $4.7 billion for disgorgement and prejudgment interest, along with $100 million and $420 million, respectively, in civil penalties for Kwon and Terraform. This proposed fine is the largest ever for the crypto industry and highlights the increasing scrutiny from US regulators. In a court filing, the SEC emphasized the need to send a strong message against such misconduct, which it claims will not be tolerated henceforth.
Kwon And Terraform's Response
Terraform's legal team countered the proposed fine, arguing for a significantly lower penalty. They suggested a civil penalty of $1 million with no injunctive relief or disgorgement. Both parties have until May 6 and May 1, respectively, to submit supplements to their proposals.
Kwon's lawyers argued that his actions had no substantial effect in the US and were performed entirely abroad, primarily in Korea and Singapore.
Upcoming Court Proceedings
In an April 29 filing, Judge Jed Rakoff scheduled a court appearance for May 22 for lawyers representing the SEC, Kwon, and Terraform Labs. This hearing aims to discuss proposed remedies following the jury verdict. While all parties have already submitted filings regarding disgorgement and civil penalties, Judge Rakoff's order allows for additional supplements before the court appearance.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
