The Securities and Exchange Commission (SEC) of the United States has taken legal action against Terraform Labs and its co-founder, Do Kwon, following a verdict in a civil case. The SEC has filed a motion in the U.S. District Court, requesting that Terraform and Kwon pay approximately $4.7 billion in disgorgement and prejudgment interest, as well as a combined $520 million in civil penalties. Terraform and Kwon have also submitted their own proposals for potential penalties, with the crypto firm suggesting a maximum civil penalty of $3.5 million and Kwon proposing $800,000.
In addition to the financial penalties, the SEC has proposed that Kwon be barred from serving as an officer or director of a securities issuer and that he disclose detailed information about his accounts and assets. The SEC also wants to impose a conduct-based injunction on Terraform to prevent them from engaging in the same fraudulent behavior. These proposed remedies and penalties are awaiting a ruling from a judge.
The SEC filing stated that the defendants have shown no remorse for their actions and that there is a high likelihood of further violations. The SEC wants the court to send a clear message that this kind of misconduct and the attempt to create new rules for crypto markets in violation of securities laws will not be tolerated.
On April 5, a jury found Terraform and Kwon guilty of defrauding investors with false statements about the offer and sale of TerraUSD (UST), Luna (LUNA), and wLUNA. Terraform has not yet responded to the recent filing by the SEC.
It is worth noting that Kwon was not present during the SEC trial as he is currently dealing with court proceedings in Montenegro. He was arrested in March 2023 for using falsified travel documents while attempting to leave the country. Although he has been released and allowed to travel within Montenegro, it is unclear whether he will be extradited to the U.S. or South Korea, where he faces potential criminal charges.
Related: Terraform Labs was accused of being built on lies during the SEC trial.
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