In one of the latest developments within the regulatory landscape, the United States Securities and Exchange Commission (SEC) has asked Terraform Labs and Do Kwon to pay approximately $5.3 billion. This follows after a civil case ruling at the U.S. District Court for the Southern District of New York found both defendants liable for fraud. The SEC has now requested that they first pay $4.7 billion in disgorgement and prejudgment interest, then another $520 million in civil penalties.
Meanwhile, Terraform had suggested a maximum civil penalty of $3.5 million while Kwon proposed only $800,000. However, the SEC remains firm in its quest to have the duo cough up a significantly larger sum. The regulator is proposing an additional punishment that will see Kwon barred from serving as an officer or director of a securities issuer. Lastly, the commission also wants Kwon to give full disclosure of his accounts and assets.
For SEC, the work is not done until a conduct-based injunction is also imposed on Terraform itself. It aims to use that as a deterrent to other firms that may want to engage in similar behaviours that led to the massive fraud that the defendants committed. While all these are mere proposals contained in the SEC’s brief for potential remedies, the judgment is still pending court approval.
Do Kwon and Terraform Lack Remorse, SEC Says
In response to the filing, the SEC emphasized the lack of remorse from the defendants and stressed the importance of deterring future violations.
After a jury found Terraform and Kwon liable for defrauding investors on April 5, the SEC trial proceeded without Kwon. Recall that Kwon is currently involved in court proceedings in Montenegro where he was arrested in March 2023 for using falsified travel documents. Although he has since been released and allowed to travel within the country, questions remain about his potential extradition to the U.S. or South Korea, where he faces possible criminal charges.
As of publication, Terraform Labs has yet to respond to the recent filing. However, the crypto community eagerly awaits the outcome of the case and Kwon’s extradition.
