Terraform Labs and Co-Founder to Contest SEC's $5.3B Penalty in Upcoming Hearing
Summary:
Vying for a lighter court judgement, Terraform Labs (TFL) and co-founder Do Kwon are set to argue their proposed remedies in the SEC case against them on May 22. They contest the SEC's right to $5.3 billion in penalties following a jury's fraud conviction, indicating that any repayment should come primarily from Luna Foundation Guard. TFL's lawyers dispute the SEC's lack of concrete evidence linking TFL or Kwon's US activities to the losses central to the lawsuit. Moreover, Kwon's lawyers maintain their client's implicated conduct transpired exclusively abroad, primarily in Korea and Singapore. The legal availability of Kwon, currently awaiting extradition in Montenegro, is unclear.
A court hearing, set for May 22, will determine potential resolutions in the United States Securities and Exchange Commission's (SEC) case against Terraform Labs (TFL) and co-founder Do Kwon. The cryptocurrency company is advocating for a considerably lighter judgement than what the regulatory body has proposed. Lawyers, representing TFL in a supplemental objection to the SEC's final ruling motion filed on May 1, have argued the financial watchdog is not entitled to the $5.3 billion projected in penalties, interest, and disgorgement after a jury found TFL and Kwon culpable for fraudulent actions.
The cryptocurrency firm maintained that any repayment should mainly come from the Luna Foundation Guard (LFG), a party not involved in the civil proceeding. Attorneys for TFL argue that there is no concrete proof that the actions of TFL or Kwon in the U.S. led to the losses at the heart of the civil lawsuit. Consequently, if the SEC were to demand disgorgement and civil penalties, it blindsides TFL by giving the regulator an expansive injunction that knows no territorial bounds.
TFL's token offers and sales mostly occurred outside the U.S., making it hard for the SEC to prove direct loss from defendants' limited activities in the U.S. In an April 26 filing, Terraform put forward that
$1 million in civil penalties will be much more suitable in contrast to the SEC's billions of dollars proposal. Currently in Montenegro awaiting extradition to either the U.S. or South Korea, co-founder Kwon is resisting the SEC's proposed resolutions for the civil case on the same basis as Terraform.
Lawyers representing Mr. Kwon argued that the SEC is yet to prove convincing evidence that Mr. Kwon's actions either in or outside the U.S. had any substantial foreseeable effect within the country. The SEC's charges, according to Mr. Kwon, were entirely based on his activities overseas, particularly in Korea and Singapore.
After a two-week trial with the SEC, a jury found TFL and Kwon guilty of defrauding investors. The involved parties are expected to argue their cases about the proposed resolutions before Judge Jed Rakoff on May 22. However, given Kwon's legal predicament in Montenegro, it remains uncertain if he will be available at the time.
Published At
5/3/2024 12:52:15 AM
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