Lawyers for Terraform Labs and its founder, Do Kwon, are pushing for a fine of $1 million instead of the SEC’s proposed $5.3 billion following the Terra-Luna crash. The SEC had originally requested a $4.7 billion disgorgement and prejudgment fine, along with $520 million in civil penalties. Kwon and Terraform Labs argue that a $1 million civil penalty is more appropriate, as the SEC has failed to prove its entitlement to the expansive injunction and monetary sanctions it seeks against TFL.
The SEC charged Kwon in February 2023 after the crash of TerraUSD and Luna wiped out an estimated $40 billion from the crypto market in spring 2022. Kwon was found liable by jury trial on April 5, although he was not present at the trial and was allegedly stuck in Montenegro for using a fraudulent passport to evade the consequences of the crash. The lack of registration and compliance within the crypto sector has led to real consequences for individuals, according to SEC Director of Enforcement Gurbir S. Grewal.
Kwon’s fate is uncertain as both the U.S. and South Korea seek his extradition. His legal team is advocating for his release to South Korea, where he may receive a more lenient punishment. The SEC has been imposing substantial fines on crypto companies recently, such as a nearly $2 billion fine against Ripple Labs and a $4.3 billion penalty on Binance. It remains unclear whether Kwon and Terraform Labs will have to pay billions in fines or face additional charges in the United States.
The court filing by Kwon and Terraform Labs comes as a response to the SEC’s demand for billions in fines and penalties related to the Terra-Luna crash. The SEC has been cracking down on fraudulent activities within the crypto sector, emphasizing the need for registration and compliance to protect investors. Kwon’s absence at the trial and his alleged use of a fraudulent passport have added complexity to the legal proceedings, with both the U.S. and South Korea vying for his extradition.
The ongoing legal battle between Terraform Labs, Do Kwon, and the SEC highlights the challenges faced by regulators in the rapidly evolving crypto landscape. As crypto continues to capture mainstream attention, ensuring regulatory compliance and accountability remains a key priority for authorities. The outcome of this case will likely have broader implications for the crypto industry as a whole, shaping future regulatory approaches and enforcement actions. Until a resolution is reached, the fate of Kwon and Terraform Labs remains uncertain, with potential ramifications for the wider crypto community.
