Crypto News– The legal clash between Terraform Labs, the company behind the algorithmic stablecoin UST, and the U.S. Securities and Exchange Commission (SEC) is escalating. In late March 2024, a New York jury found Terraform and its co-founder Do Kwon guilty of fraud related to the sale of LUNA and UST tokens.
Terraform Labs’ Do Kwon in Dispute with SEC Over 5.3 Billion Dollars Fine
This verdict opened the door to substantial penalties, as the SEC seeks an unprecedented $5.3 billion fine. Despite this, Terraform Labs is refusing to comply and is challenging the charges, setting the stage for a protracted legal showdown.
Terraform’s legal team argues that the SEC has overstepped its bounds. They assert that the majority of token sales took place outside the U.S., beyond the SEC’s jurisdiction. Additionally, they emphasize the absence of clear evidence connecting Terraform’s limited U.S. activities to the significant investor losses claimed by the SEC.
The lawyers representing Do Kwon contend that his activities with Terraform Labs were primarily conducted in Korea and Singapore. These arguments directly challenge the SEC’s assertion that Kwon’s actions had a substantial impact on the United States. Terraform’s legal defense strategy asserts that the SEC lacks the authority to prosecute Kwon due to the geographical location of his operations.
Terraform Labs’1 Million Dollars Counterproposal to SEC
The SEC and Terraform Labs hold starkly contrasting perspectives on the penalty for the alleged misconduct. The SEC is pushing for a hefty $5.3 billion fine from Terraform, aiming to deter future wrongdoing in the crypto sphere. However, Terraform contends that this amount is unjust.
In legal filings, Terraform’s legal team proposed that a $1 million penalty would be more equitable. The vast disparity between $5.3 billion and $1 million underscores the significant disagreement between the two parties regarding Terraform’s purported misconduct.
The court should not grant any injunctive relief or disgorgement and should impose at most a $1 million civil penalty against TFL (Terraform Labs), stated the lawyers.
The SEC views this case as a critical opportunity to safeguard retail investors from deceptive practices within the cryptocurrency realm. Director Gurbir Grewal emphasized the substantial financial losses suffered by investors as a result of Terraform’s actions, underscoring the imperative for regulatory supervision.
1 Comment