U.S. SEC pursues €4.9 billion fine against Terraform Labs and Do Kwon

Category: Americas Crypto Regulatory

The U.S. Securities and Exchange Commission (SEC) has intensified its legal pursuit against Terraform Labs and its co-founder, Do Kwon, urging a New York court to impose a staggering $5.3 billion (€4.9 billion) fine. This move follows the recent civil fraud conviction of Terraform Labs and Kwon, attributed to their involvement in the $40 billion (€37.3 billion) collapse of the Terra ecosystem in 2022.  

Misleading investors and ill-gotten gains

The Manhattan jury’s verdict earlier this month found Terraform Labs and Kwon guilty of misleading investors about the stability of Terra USD (UST) and the applications of the Terra blockchain. The SEC’s motion for final judgment seeks $4.74 billion (€4.42 billion) in disgorgement and prejudgment interest, along with an additional $520 million (€485 million) in civil penalties, distributing $420 million (€393 million) to Terraform Labs and $100 million (€93.4 million) personally to Kwon.  

Justification and financial impact

Citing court documents, the SEC justifies its requested fine, alleging that Terraform Labs and Kwon amassed “over $4 billion (€3.7 billion) in ill-gotten gains” through their illicit activities. Notably, institutional sales of LUNA and MIR reached $65.2 million (60.8 million) and $4.3 million (€4 million), respectively, with additional substantial transactions through various platforms, totalling $4.1 billion (€3.8 billion).  

Remedial measures and future prevention

In addition to monetary penalties, the SEC seeks injunctions to prevent future securities violations and an officer-and-director ban on Kwon.

Terraform Labs and Kwon’s response

In response, Terraform Labs refutes the SEC’s call for injunctive relief and disgorgement, advocating solely for appropriate civil penalties. During the trial, Terraform Labs’ CEO, Chris Amani, disclosed the company’s remaining assets of approximately $150 million (€140 million) amidst its bankruptcy proceedings.  

Meanwhile, Kwon’s legal team contends that injunctive relief is unwarranted due to his current unemployment status and pending criminal charges. Kwon, who remains in Montenegro following his arrest last year, faces extradition requests from both the U.S. and South Korea for his alleged role in the Terra collapse.