Terraform Labs and CEO Do Kwon Aim to Settle SEC Fraud Case
Summary:
Terraform Labs and its CEO Do Kwon have in principle agreed to settle a fraud case with the U.S. Securities and Exchange Commission (SEC). This decision follows accusations that the company sold crypto assets without due registration and misled investors. The SEC seeks roughly $5.3 billion in various penalties, although Terraform proposed only $1 million. The case's conclusion is expected by June 12, 2024. Kwon, facing other potential charges, is also under extradition proceedings.
In recent court documents, Terraform Labs and CEO Do Kwon have preliminarily agreed to settle a fraud case with the U.S. Securities and Exchange Commission (SEC). Both parties confirmed this potential resolution during a telephone discussion with Judge Jed S. Rakoff on May 29. By June 12, 2024, they aim to have all settlement terms finalised and ready for court approval. Back in February, Terraform and Kwon were held accountable for deceiving investors in a civil case with the SEC. May 29 was set aside to talk over possible remedies. Terraform and Kwon's case revolved around the deceptive marketing and distribution of cryptocurrency tokens, specifically focusing on the Terra USD (UST) algorithmic stablecoin and associated tokens. The SEC claimed that Terraform and Kwon were selling these crypto assets without the necessary registration and were duping investors about their security and potential for returns. Terraform's collapse in May 2022 set off a significant downturn in crypto markets, affecting multiple crypto businesses and investors. Terraform and Kwon may be hit with a hefty financial sanction, as the SEC is aiming for around $5.3 billion in disgorgement, prejudgment interest, and civil penalties. However, Terraform Labs is proposing a significantly lesser penalty of $1 million, arguing against disgorgement, especially from connected entities not directly named in the SEC's case, such as the Luna Foundation Guard. Furthermore, the SEC is proposing to forbid Kwon from serving as an officer or director in any entity issuing securities. The SEC is also demanding complete disclosure of Kwon's financial accounts and assets. Kwon, in a separate filing, argued that revealing information about his assets and accounts would infringe on his Fifth Amendment right to protection from self-incrimination. Kwon was taken into custody in March 2023 for faking travel documents while attempting to leave Montenegro, where he possibly faces other charges. He was eventually granted bail, and the U.S. is seeking his extradition. Magazine: Unforeseen threats to Ethena's stablecoin framework.
Published At
5/30/2024 7:18:55 PM
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