An Overview of Terraform SEC’s $5.3 Billion Fine
Terraform Labs (TFL) and its founder, Do Kwon, are facing pressure to pay $5.3 billion in cumulative damages for fraud linked to the now-defunct Terra blockchain. The U.S. Securities and Exchange Commission (SEC) recently filed a request dated April 19, asking Kwon and his company to pay approximately $4.2 billion in disgorgement and around $546 million in pre-judgment interest after losing a lawsuit against the regulator on all counts.
Is this the Largest Crypto Fine Ever?
The SEC has urged Terraform and Do Kwon to pay a $420 million fine and a $100 million civil penalty, in addition to the disgorgement charges. The order specifies that the monetary penalties against the firm cannot be discharged in bankruptcy, and it would prevent Kwon from serving as a director of a securities issuer in the future.
- The case could potentially set a record as the most extensive crypto enforcement action ever, surpassing Binance’s $4.3 billion settlement with the Department of Justice earlier this year.
TFL vs. Binance: Different Charges
In contrast to Binance’s case, which focused on inadequate anti-money laundering controls, TFL’s case revolves around securities law violations and defrauding investors. The charges include misleading investors regarding the stability and profitability of the blockchain’s associated tokens – LUNA and UST.
- The SEC’s Division of Enforcement Director, Gurbir S. Grewal, emphasized the significant losses incurred by investors due to these deceptions, affecting billions in market value almost overnight.
Response from Do Kwon
Kwon has pushed back against the SEC’s request, arguing that there is no evidence to support injunctive relief against him or to suggest a repeat of the alleged conduct. His legal team also contends that disgorgement fines are unjustified as Kwon did not personally benefit from the scheme apart from the earnings of TFL.
Kwon’s lawyers believe that approximately $800,000 would be a more appropriate civil penalty in his case.
Hot Take: Closing Thoughts
The SEC’s pursuit of Terraform Labs and Do Kwon for a $5.3 billion fine marks a significant development in the realm of crypto enforcement. The outcome of this case could potentially shape future regulations and enforcement actions within the industry, emphasizing the importance of compliance and transparency for all players in the crypto space.
Owen Patter is a distinguished crypto analyst, accomplished researcher, and skilled editor, leaving a notable imprint on the cryptocurrency landscape. As a proficient crypto analyst and researcher, Owen delves into the intricate realms of digital assets, offering insights that resonate with a diverse audience. His analytical acuity is harmoniously paired with adept editorial skills, allowing him to transform complex crypto information into easily comprehensible content.