Terraform Labs (TFL) and its co-founder, Do Kwon, are set to face a hearing on May 22 regarding proposed remedies in the Securities and Exchange Commission’s (SEC) case against them. However, the crypto firm is pushing for a different judgment than what the regulator has suggested.
In a recent supplement to Terraform Labs’ opposition to the SEC’s motion for final judgment, the firm’s lawyers argued that the financial regulator should not be entitled to $5.3 billion in disgorgement, interest, and civil penalties. They emphasized that any disgorgement should be obtained from the Luna Foundation Guard (LFG), which is a “non-party” in the civil case.
According to Terraform’s lawyers, the SEC has no evidence to support its claim that the firm’s activities in the U.S. caused the losses in question. They argued that if the commission were to pursue disgorgement and civil penalties, it would essentially grant the regulator a “territorially unlimited injunction.”
“TFL’s offers and sales of tokens occurred almost entirely outside the U.S. […] and the SEC has submitted no evidence that Defendants’ limited activities in the U.S. directly caused any losses, much less the billions the SEC seeks in disgorgement,” stated the filing.
Earlier, on April 26, Terraform had suggested that $1 million in civil penalties would be more appropriate than the SEC’s multibillion-dollar proposal. Kwon, who is currently awaiting extradition in Montenegro, has also opposed the SEC’s proposed remedies on similar grounds.
“The SEC must still establish that Mr. Kwon engaged in conduct within the United States or conduct without the United States that had a ‘foreseeable substantial effect’ in the United States,” argued Terraform Labs’ lawyers. “Mr. Kwon’s role in the conduct that forms the basis of the SEC’s requested judgment was performed entirely abroad, in Korea and Singapore.”
After a two-week trial, a jury found Terraform and Kwon liable for defrauding investors. All parties involved are scheduled to present their arguments for proposed remedies before Judge Jed Rakoff on May 22. However, it remains uncertain whether Kwon will be available due to his legal situation in Montenegro.