Federal regulators are urging for a $5.3 billion fine to be imposed on Terraform Labs and its co-founder, Do Kwon, following allegations of investor fraud. This recommendation comes shortly after both parties were held accountable for a multi-billion-dollar fraudulent scheme.
According to a court filing dated April 19, the U.S. Securities and Exchange Commission (SEC) is seeking approximately $4.7 billion in disgorgement and prejudgment interest from Kwon and Terraform for their involvement in the 2022 Terra-Luna collapse. Additionally, the SEC is requesting civil penalties of $420 million for Terraform and $100 million for Kwon.
In its filing, the SEC emphasized the need for the court to deliver a clear message against such audacious misconduct. The commission condemned the defendants’ attempts to justify their actions by proposing new rules and standards for crypto markets, contrary to federal securities laws.
The civil court jury in New York found Kwon and his company liable for deceiving customers regarding the safety of investing in Terra USD (UST), an algorithmic stablecoin, and its underlying blockchain’s utility. Court documents reveal that crypto investors purchased over $2 billion worth of UST from various exchanges and trading venues.
Describing its proposed fines as “conservative” yet “reasonable,” the SEC highlighted Kwon’s substantial gains from Terraform’s unstable stablecoin venture. However, Terraform Labs is disputing the proposed penalties, arguing for a maximum fine of $3.5 million, while Kwon has offered to pay only $800,000.
