Terraform Labs and Co-Founder Face Billions in Penalties Amid Fraud Charges
Summary:
Terraform Labs and its co-founder, Do Kwon, have been found liable for fraud by a jury in a case initiated by the U.S. Securities and Exchange Commission (SEC). The issue will proceed to a hearing on May 22 where parties will discuss potential financial remedies, ranging from millions to billions of dollars. The SEC is seeking $4.7 billion in disgorgement and prejudgment interest, plus an additional $520 million penalty whereas Terraform proposes only a $1 million penalty. Kwon remains in Montenegro where extradition is being considered following his arrest there in 2023. Terraform, currently under bankruptcy since filing for Chapter 11 in January, reported liabilities and assets between $100 and $500 million.
A federal judge has scheduled a hearing after a jury found Terraform Labs and its co-founder Do Kwon liable for fraudulent actions in connection to a case with the U.S. Securities and Exchange Commission (SEC). On April 29, Judge Jed Rakoff asked attorneys for the SEC, Kwon, and Terraform to meet in court on May 22 to discuss potential remedies, whose estimates range from millions to billions of dollars.
The SEC is seeking approximately $4.7 billion in disgorgement and prejudgment interest, plus an additional $520 million in civil penalties from Kwon and Terraform. However, Terraform's lawyers have proposed a significantly lower sum of $1 million in civil penalties and no disgorgement. The parties have until May 6 and May 1 to alter their proposals.
On April 5, a jury deemed Kwon and Terraform responsible for deceiving investors following a two-week trial run by the SEC. Kwon did not physically attend the trial due to his 2023 arrest in Montenegro on charges of using false travel documents. As the country's courts consider extradition requests from the US and South Korea, Kwon, co-founder of Terraform, remains in Montenegro, and it remains uncertain whether he can appear in the U.S. court on May 22.
Since filing for Chapter 11 in January, Terraform has been undergoing bankruptcy proceedings. The company has reported liabilities and assets totaling between $100 and $500 million at the time.
Published At
5/1/2024 12:33:49 AM
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