The aftermath of the civil case between the SEC and Terraform Labs, along with co-founder Do Kwon, has taken a significant turn as the commission files a motion for substantial disgorgement and civil penalties.
In a recent filing with the U.S. District Court for the Southern District of New York, the SEC has urged Terraform and Kwon to pay approximately $4.7 billion in disgorgement and prejudgment interest, alongside a combined $520 million in civil penalties. Terraform proposed a maximum civil penalty of $3.5 million, while Kwon suggested $800,000.
The proposed remedies also include barring Kwon from holding officer or director positions in securities issuers, as well as compelling full disclosure of his accounts and assets. Additionally, the SEC is pushing for a conduct-based injunction against Terraform to prevent recurrence of fraudulent behavior.
According to the SEC, the defendants have not exhibited remorse for their actions, and there are concerns about the potential for further violations. The commission asserts the need for a strong message against such misconduct and attempts to sidestep securities laws.
The civil case stemmed from allegations of defrauding investors regarding the sale of TerraUSD (UST), Luna (LUNA), and wLUNA. Despite Terraform’s spokesperson stating they were considering their options, the SEC proceeded with the trial, even in the absence of Kwon, who is facing legal proceedings in Montenegro.
Kwon’s arrest in March 2023 for using forged travel documents complicated the situation, leaving questions about potential extradition to the U.S. or South Korea. While released for travel within Montenegro, Kwon’s legal status remains uncertain, with potential criminal charges looming in multiple jurisdictions.