Crypto News – Crypto Firm Terraform Labs Faces $5.3 Billion Fine for Alleged Investor Fraud

Crypto News – Crypto Firm Terraform Labs Faces $5.3 Billion Fine for Alleged Investor Fraud

Crypto News – Federal regulators have filed a request for Terraform Labs and its co-founder, Do Kwon, to be fined $5.3 billion due to allegations of defrauding investors, following their recent liability in a multi-billion-dollar fraud case.

According to a court filing dated April 19th, the U.S. Securities and Exchange Commission (SEC) is seeking approximately $4.7 billion in disgorgement and prejudgment interest from Kwon and Terraform for their involvement in the Terra-Luna collapse of 2022. Additionally, the SEC is urging the court to impose civil penalties of $420 million on Terraform and $100 million on Kwon individually.

In the filing, the SEC emphasized the necessity for the court to convey a clear message against such blatant misconduct, stating, “The Court should send an unequivocal message that this sort of brazen misconduct, and Defendants’ misbegotten attempt to excuse their behavior by crafting new rules and standards of behavior for crypto markets in contravention of the federal securities laws […] will not be tolerated.“

The jury’s verdict from a New York civil court found Kwon and his company liable for deceiving customers regarding the safety of investing in their algorithmic stablecoin, Terra USD (UST), and the utility of its underlying blockchain. Court documents reveal that crypto investors purchased over $2 billion worth of UST from various exchanges and trading venues.

Describing the proposed fines as “conservative” but “reasonable,” the SEC highlighted the substantial wealth accumulated by Kwon from Terraform’s troubled stablecoin venture. However, Terraform Labs is contesting the amount of civil penalties, arguing for a maximum fine of $3.5 million, while Kwon has offered to pay just $800,000.