Updated: April 23, 2024, 5:38 PM EDT
Federal regulators have requested that Terraform Labs and its co-founder Do Kwon be fined $5.3 billion for investor fraud. It comes shortly after two parties were found responsible for a multibillion-dollar fraud.
According to a court filing on April 19, the U.S. Securities and Exchange Commission has asked Kwon and Terraform to pay about $4.7 billion in clawbacks and judgment interest for their roles in the 2022 Terra-Luna collapse. The SEC also asked the court to order Terraform and Kwon to pay $420 million and $100 million, respectively, in civil penalties.
“The court should send a clear message that this type of blatant misconduct and violation of federal securities laws will not (…) be a misguided attempt by defendants to excuse their actions by creating new rules and standards of conduct for the cryptocurrency market. do. The SEC said in a filing:
Kwon and his company were found guilty of misleading customers about the safety of investments in the algorithmic stablecoin Terra USD (UST) and the usefulness of the underlying blockchain, according to a verdict by a New York civil court jury. According to court documents, cryptocurrency investors purchased more than $2 billion worth of UST on exchanges and other trading venues alone.
The SEC called the proposed fines “conservative” but “reasonable,” according to the filing. Especially considering that Kwon made his fortune from Terraform’s ill-fated stablecoin. The company and its founders dispute the amount of the civil penalty, with Terraform Labs arguing a fine of up to $3.5 million would be more appropriate and Kwon offering to pay just $800,000.
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About the author
Elizabeth Napolitano is a data reporter covering business and technology news with a focus on cryptocurrency. Before she joined The Block, Elizabeth reported on BigTech, AI, cryptocurrency, and video games for CBS Moneywatch. As a CoinDesk reporter, she covered DeFi, NFTs, and US courts. She received a master’s degree in journalism from CUNY. Follow her on X: @LizKNapolitano