The response by lawyers representing the United States Securities and Exchange Commission (SEC) to a memo filed by Terraform Labs regarding proposed remedies for judgment in a civil case has been submitted. The SEC has countered Terraform’s arguments for reduced disgorgement in the judgment, following a jury’s finding of liability against the firm. SEC lawyers argue that Terraform and its co-founder, Do Kwon, never presented in court the argument that the commission was enforcing federal laws outside the United States in relation to the offer and sale of tokens. The SEC filing states, “Defendants’ arguments lack merit as they rely on a misapplication of the law and misstatement of the relevant facts.”
Even if the court were to accept the legal basis of Terraform’s argument, the SEC cites various activities in the U.S. that could be used to enforce securities laws. Terraform’s argument fails to acknowledge the involvement of U.S. company Jump in restoring TerraUSD (UST) to its dollar peg. The SEC highlights that Terraform’s former communications head, based in California, posted misleading tweets at Kwon’s direction, falsely crediting UST’s recovery to its algorithm. Kwon himself promoted UST at a conference in New York and spoke to media outlets with a U.S. audience.
The SEC intends to seek $3.6 billion in disgorgement from Terraform and Kwon, as well as $1.7 billion in “ill-gotten gains from Defendants’ net sales of UST.” In response, Terraform has proposed a $1 million civil penalty and no disgorgement.
Following a two-week trial, a jury found Terraform and Kwon guilty of fraud in April. All parties involved in the civil lawsuit are scheduled to return to court on May 22, where Judge Jed Rakoff will consider the proposed remedies.
Kwon was unable to attend the trial in person due to legal issues in Montenegro. In 2023, he was arrested and sentenced to four months in prison for using falsified travel documents. As extradition requests from the U.S. and South Korea are being considered by Montenegro’s courts, Kwon remains in the country.
Source: PACER
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Do Kwon’s extradition to South Korea delayed by Montenegrin court
In the latest edition of Hodler’s Digest, CZ receives a jail sentence, Gensler expresses his view of Ether as a security, and the FBI targets mixers. The magazine covers news from April 28 to May 4.