Following a jury’s verdict that found Terraform Labs and co-founder Do Kwon guilty of fraud in a case with the United States Securities and Exchange Commission, a federal judge has ordered the parties to discuss potential remedies, which could range from millions to billions of dollars.
In a filing made on April 29 in the U.S. District Court for the Southern District of New York, Judge Jed Rakoff instructed the SEC, Kwon, and Terraform Labs’ lawyers to appear in court on May 22. During this hearing, they will present arguments for the proposed remedies following the jury’s verdict. All parties have already submitted their filings regarding disgorgement and civil penalties, but Judge Rakoff allowed for additional supplements to be filed before the court appearance.
The SEC has requested that Kwon and Terraform Labs pay approximately $4.7 billion in disgorgement and prejudgment interest, as well as a combined $520 million in civil penalties. On the other hand, Terraform Labs’ legal team has suggested a $1 million civil penalty and no “injunctive relief or disgorgement.” Both parties have until May 6 and May 1, respectively, to file supplements to their existing proposals.
On April 5, a jury found Terraform Labs and Kwon guilty of defrauding investors after a two-week trial with the SEC. Kwon was unable to attend the trial in person due to his arrest in Montenegro in 2023 for using falsified travel documents. As of now, Kwon remains in Montenegro, and it is unclear whether he will be able to appear in the U.S. court on May 22, as extradition requests from the U.S. and South Korea are being considered by Montenegro’s courts.
Terraform Labs filed for Chapter 11 bankruptcy protection in January, and the bankruptcy proceedings have been ongoing. At the time of filing, the company reported estimated liabilities and assets ranging between $100 million and $500 million.
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