Lawyers for Terraform Labs and its founder, Do Kwon, are disputing the United States Securities and Exchange Commission’s (SEC) proposed fine of $5.3 billion following the Terra-Luna crash in early April. Instead, they are pushing for a fine of $1 million. The SEC had initially requested a $4.7 billion disgorgement and prejudgment fine, along with an additional $520 million in civil penalties. The court filing from Kwon and Terraform Labs argues that the SEC has failed to prove its entitlement to such extensive monetary sanctions against the blockchain platform.
The SEC had charged Do Kwon in February 2023 after the collapse of the algorithmic stablecoins TerraUSD and Luna, which resulted in a $40 billion loss in the crypto market. Kwon, who was found liable by a jury trial on April 5, was not present at the trial as he had used a fraudulent passport to evade consequences and was stuck in Montenegro. The SEC Director of Enforcement emphasized the importance of registration and compliance within the crypto market, stating that the lack of these measures can have real consequences for individuals. The SEC has been imposing substantial fines on crypto companies recently, including hefty penalties on Ripple Labs and Binance.
As Do Kwon’s fate remains uncertain, both the U.S. and South Korea are vying for his extradition. Kwon’s legal team is advocating for his release to South Korea, where he may face a less severe punishment. It is unclear whether Kwon and Terraform Labs will have to pay the proposed billions in fines or face additional charges in the United States. The SEC’s aggressive stance on imposing fines on crypto companies reflects its commitment to protecting the investing public and enforcing compliance within the market. The outcome of this case will shed light on the repercussions of fraudulent actions within the crypto industry and the accountability that companies and individuals must uphold to maintain market integrity.
