SEC Rejects Terraform Labs' Arguments in Civil Case
Sentiment: Negative
The U.S. Securities and Exchange Commission (SEC) has pushed back against Terraform Labs' attempts to lessen penalties in a civil case following allegations of fraud. In April 2024, Terraform Labs, along with its co-founder Do Kwon, were found liable for fraud by a jury.
In a filing dated May 6th, the SEC contested Terraform Labs' argument for reduced penalties, asserting its authority in the case despite the alleged fraudulent activities occurring outside the United States.
SEC's Response
The SEC refuted Terraform Labs' claim, highlighting that the defense had not previously raised the issue of jurisdiction during the trial. Moreover, the SEC provided evidence of U.S.-based activities that they believe justified their involvement in the case:
Monetary Penalties Proposed
The SEC is pursuing significant penalties against Terraform Labs and Do Kwon. They aim for $3.6 billion in disgorgement from the company and its co-founder, along with an additional $1.7 billion representing "ill-gotten gains". However, Terraform Labs has proposed a much lower civil penalty of $1 million with no disgorgement.
Next Steps
The case is set for a court hearing on May 22nd, during which Judge Jed Rakoff will determine the appropriate penalties. Notably, Do Kwon is currently located in Montenegro and faces extradition requests. He has encountered legal issues previously, including arrest for allegedly using fraudulent travel documents.
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