Terraform Labs (TFL) and its leader, Do Kwon, face a significant financial obligation of approximately $5.3 billion collectively, due to alleged fraud incidents surrounding the collapse of their former Terra blockchain.
On April 19th, the Securities and Exchange Commission (SEC) asked the court to make Kwon and his firm pay approximately $4.2 billion in disgorgement and an additional $546 million as pre-judgment interest. This decision came after the SEC won its case against them on all counts in early April.
The Largest Crypto Fine Ever?
The agency demanded that Terraform and Do Kwon each pay a fine of $420 million and $100 million in civil penalties, along with other financial compensation.
The decree included provisions preventing the company from discharging monetary penalties in bankruptcy, and it prohibited Kwon from serving as a securities issuer’s director once more.
If the court complies with this decision, the case may become the most significant cryptocurrency enforcement action to date, exceeding the $4.3 billion settlement reached between the Department of Justice and Binance, the largest crypto exchange, back in February.
At Binance, the fees were attributed to insufficient anti-money laundering measures in place. In contrast, Transport for London (TFL) accused the party in question of breaching securities laws and deceiving investors.
The company deceitfully misrepresented the characteristics and profit-generating potential of its LUNA and UST tokens, which are linked to its blockchain, regarding their stability and capacity to bring investors gains.
“The SEC’s enforcement chief, Gurbir S. Grewal, commented after the court ruling on April 5th, stating that by means of their deceitful actions, the defendants inflicted substantial damages on investors and erased over $20 billion in market worth almost instantly.”
“Despite crypto’s potential benefits, the absence of required registrations and compliance can bring about genuine repercussions for everyday people,” he added.
Do Kwon’s Counterarguments
In answer to the SEC’s demand, Kwon has contested the granting of any kind of injunction against him. He asserts that there isn’t sufficient proof showing that he will engage in the same questionable actions again.
Kwon’s legal team argued that since he didn’t personally gain from the illegal activities, apart from TFL’s profits, the penalties for disgorgement were unfair.
Regarding civil penalties, Kwon’s lawyers claimed he should be charged a little over $800,000.
Based on the points made earlier, the court should deny an injunction and disgorgement order against Mr. Kwon. Civil penalties may be imposed instead, determined by the criteria discussed above and in TFL’s remedies brief, if the SEC can prove its case.
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2024-04-23 22:22