The United States Securities and Exchange Commission (SEC) has taken legal action against Terraform Labs and its co-founder, Do Kwon, by filing a petition demanding the payment of civil fines and disgorgement totaling billions of dollars. This move aims to hold Terraform Labs and Kwon accountable for the alleged violations they have committed.
Disgorgement and Civil Penalties: The SEC is seeking approximately $4.7 billion in disgorgement and prejudgment interest from Terraform Labs and Kwon. Disgorgement involves repaying earnings obtained through dishonest means, while prejudgment interest compensates for the time value of money. Additionally, the SEC is requesting $520 million in civil penalties, with Terraform Labs facing $420 million and Kwon facing $100 million in penalties.
Possible Solutions: Terraform Labs and Kwon have proposed several potential solutions in response to the civil case. Terraform Labs suggested a maximum civil penalty of $3.5 million, while Kwon proposed a penalty of $800,000. These proposed amounts are substantially lower than the SEC’s demands.
The SEC is considering additional measures to deter future breaches, including prohibiting Kwon from serving as an officer or director of a securities company. Additionally, the SEC seeks a “conduct-based injunction” to prevent Terraform Labs and Kwon from committing similar breaches in the future.
The SEC’s enforcement action underscores the agency’s commitment to safeguarding investors and prosecuting securities law violations. By holding individuals and companies accountable for their actions, the SEC aims to maintain the integrity of financial markets and promote fair practices.
