The Securities and Exchange Commission (SEC) of the United States has taken legal action against Terraform Labs and its co-founder Do Kwon, seeking billions of dollars in disgorgement and civil penalties. This comes after a ruling in a civil case against them.
In a filing on April 19, the SEC requested that Kwon and Terraform pay approximately $4.7 billion in disgorgement and prejudgment interest, as well as a combined $520 million in civil penalties. The suggested civil penalties from Terraform and Kwon were significantly lower, with the crypto firm proposing a maximum penalty of $3.5 million and Kwon suggesting only $800,000.
The SEC also proposed additional measures, including barring Kwon from serving as an officer or director of a securities issuer and providing full details of his accounts and assets. If approved, Terraform would also be subject to a conduct-based injunction to prevent them from engaging in similar fraudulent behavior. The proposed remedies and civil judgment are yet to be ruled on by a judge.
The SEC filing stated that the defendants have shown no remorse for their actions and that there is a likelihood of further violations occurring. The SEC believes that the court should send a clear message that such misconduct will not be tolerated.
On April 5, a jury found Terraform and Kwon guilty of defrauding investors through misleading statements about TerraUSD (UST), Luna (LUNA), and wLUNA. Terraform has not yet responded to the April 19 filing.
It is worth noting that Kwon was absent from the SEC trial as he is currently involved in court proceedings in Montenegro. He was arrested in March 2023 for using falsified travel documents while attempting to leave the country. Whether he will be extradited to the U.S. or South Korea is still uncertain, as he faces potential criminal charges in both countries.