Terraform's Lawyers Reject SEC's $5.3B Fine Proposal
Do Kown's legal team suggest a much lower fine instead in a move that follows a jury finding the platform liable for fraud
April 30, 2024 06:00 AM
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TL;DR Lawyers for Terraform Labs have contested the SEC's hefty $5.3 billion penalty proposal, suggesting a $1 million fine instead after a fraud verdict. The motion highlights the complexities around disgorgement and defendants' rights, underlining the ongoing legal tussle between Terraform, its co-founder Do Kwon, and regulatory authorities.
In a significant development in the ongoing legal saga between Terraform Labs and the United States Securities and Exchange Commission (SEC), Terraform's lawyers have filed a motion opposing the SEC's request for $5.3 billion in disgorgement and civil penalties.
This move comes after a jury found the platform and its co-founder, Do Kwon, liable for fraud, marking a pivotal moment in the case.
The Argument Against Disgorgement Terraform's legal team argued that the court should reject the SEC's disgorgement and injunctive relief request. They pointed out that the funds in question would have to come from the Luna Foundation Guard (LFG), which was not named as a party in the case.
They contended that the funds belonged to LFG, not Terraform Labs, and that LFG conducted the token sales. This distinction, they argued, makes the SEC's proposed disgorgement inappropriate.
A Call for Reduced Penalties Further, Terraform suggested that a $1 million civil penalty would be more suitable than the SEC's proposed multibillion-dollar penalty. This suggestion contrasts with the SEC's stance but highlights Terraform's position.
A separate filing from Do Kwon opposed the commission's motion on different grounds, arguing that full disclosure of his accounts and assets would infringe on his Fifth Amendment rights.
"To pursue disgorgement from LFG, the SEC was required to name LFG as a defendant or relief defendant, which it did not do." This statement underlines the legal strategy employed by Terraform's defense.
Legal and Personal Challenges for Kwon Do Kwon's legal troubles extend beyond the U.S. courts? He was arrested in Montenegro for using falsified travel documents. Restrictions on international travel hampered his ability to participate in trials, adding another layer of complexity to the case.
Awaiting Judicial Decisions The crypto community is watching closely as the legal battle unfolds. The outcome of this case could have significant implications for Terraform Labs, Do Kwon, and the broader regulatory landscape for digital assets. Judge Jed Rakoff's decisions on the proposed remedies will be critical in determining the next steps in this high-stakes legal confrontation.
