SEC Seeks Over $5 Billion from Terraform, Do Kwon for Investor Fraud

The SEC seeks over $5 billion in disgorgement and civil penalties from Terraform Labs and Do Kwon, alleging fraud in the sale of Terra Luna and UST tokens. A jury previously found them liable, but Terraform suggested a $5.28 million fine and Kwon $828,000. The SEC argues that the defendants have shown no remorse and requests a "conduct-based injunction" to prevent future violations.

US Securities and Exchange Commission (SEC) Demands Over $5 Billion from Terraform Labs and Do Kwon for Defrauding Investors

New York, NY – The United States Securities and Exchange Commission (SEC) has filed a motion in the U.S. District Court for the Southern District of New York, seeking billions of dollars in disgorgement and civil penalties from Terraform Labs and its co-founder, Do Kwon. This action follows a jury's April 5th verdict finding Terraform and Kwon liable for defrauding investors concerning statements regarding the offer and sale of TerraUSD (UST), Luna (LUNA), and wLUNA.

The SEC's motion seeks approximately $4.7 billion in disgorgement and prejudgment interest from Terraform Labs and Kwon. The regulator has also requested a total of $520 million in civil penalties, with Terraform Labs facing a penalty of $420 million and Kwon facing a penalty of $100 million. Cumulatively, the SEC is requesting over $5 billion in penalties from Do Kwon and Terraform Labs.

This request for penalties far exceeds the sums proposed by Terraform and Kwon. In their filings, Terraform suggested a maximum civil penalty of $5.28 million, while Kwon proposed approximately $828,000.

In addition to monetary penalties, the SEC has proposed barring Kwon from holding positions as an officer or director and mandating full disclosure of his accounts and assets. Terraform could also face a "conduct-based injunction" to prevent the recurrence of the behaviors that led to the extensive fraud.

The SEC argues that Terraform and Kwon have shown no remorse for their actions and continue to demonstrate a lack of understanding of the gravity of their conduct. The regulator fears that without significant penalties, Terraform and Kwon may continue to engage in violations of the federal securities laws.

The SEC's motion emphasizes the need to send a clear message that such blatant misconduct will not be tolerated. The regulator believes that the proposed penalties are necessary to deter Terraform, Kwon, and others from engaging in similar fraudulent schemes in the future.

Judge Paul G. Gardephe will oversee the case and determine the final penalties based on the jury's verdict and the arguments presented by the SEC, Terraform, and Kwon. A hearing to consider the SEC's motion is scheduled for March 2, 2024.