The U.S. Securities and Exchange Commission (SEC) has filed a motion seeking billions of dollars in illegal profits and civil fines from Terraform Labs and its co-founder Do Kwon, following a civil case ruling.
In a filing submitted to the U.S. District Court for the Southern District of New York on April 19, the SEC is seeking approximately $4.7 billion in disgorgement and pre-judgment interest from Kwon and Terraform, as well as a total of $520 million in civil penalties – $420 million from Terraform and $100 million from Kwon. The Commission, Terraform, and Kwon have also submitted briefs outlining potential remedies in the civil case, with the crypto company suggesting a maximum civil penalty of $3.5 million, while Kwon argues for a penalty of $800,000.
In addition to the fines, the SEC is also proposing to prohibit Kwon from serving as an officer or director of a securities issuer and to require him to provide a complete accounting of his accounts and assets. If approved, Terraform would also be subject to a “conduct-based injunction” to prevent it from “engaging in conduct substantially similar to the conduct that led to the widespread fraud.” The proposed remedies and civil judgment have yet to be ruled on by a judge.
The SEC’s filing states, “Defendants have shown no remorse for their actions, and there is little doubt that their conduct, which is likely more extensive than has been identified, has been and is likely to be repeated. The Court should send a clear message that such brazen misconduct, as well as Defendants’ misguided attempt to justify their conduct through the promulgation of new rules and standards for the crypto market that violate federal securities laws, is intolerable.”
On April 5, a jury found Terraform and Kwon liable for deceiving investors in the offering and sale statements of TerraUSD (UST), Luna, and wLUNA. A spokesperson for Terraform stated at the time that the company was “carefully considering [its] options and next steps.”
The SEC’s trial has continued in Kwon’s absence, as he is currently embroiled in a court case in Montenegro. Terraform co-founder Kwon was arrested in March 2023 for using forged travel documents while attempting to leave the country.
Although later released and allowed to travel within Montenegro, the question of Kwon’s extradition to the U.S. or South Korea remains unanswered at the time of this article. He faces potential criminal charges in both countries.