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Home»TRADING NEWS»SEC Targets Record $5.3 Billion in Fines in Landmark Case Against Kwon and Terraform
TRADING NEWS

SEC Targets Record $5.3 Billion in Fines in Landmark Case Against Kwon and Terraform

By Crypto FlexsApril 25, 20243 Mins Read
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SEC Targets Record .3 Billion in Fines in Landmark Case Against Kwon and Terraform
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The SEC plans to impose a record $5.3 billion fine on Terraform Labs and Do Kwon for their role in the Terra/LUNA stablecoin collapse, marking a significant crackdown on cryptocurrency misconduct.

Dokwon, Terraform severe disciplinary action

The U.S. Securities and Exchange Commission (SEC) is moving to impose the largest fine yet on a cryptocurrency project, targeting a surprising $5.3 billion against Do Kwon and Terraform Labs. The two were considered responsible for the collapse of the Terra/LUNA stablecoin, a project designed to be pegged to the U.S. dollar. This collapse had far-reaching effects on the industry, causing a loss of nearly $40 billion in market value.

Both companies were found liable for fraud.

Kwon and Terraform were indicted on civil fraud charges following a two-week trial in New York earlier this month. The allegations involved concealment of risk within trading schemes and the unsustainable 20% returns offered by Terraform’s Anchor lending platform. Mr. Kwon was arrested in Montenegro, where he is still awaiting repatriation, and did not attend the trial, but the court ruled against Mr. Kwon and Terraform.

SEC’s claim

The SEC alleges that Kwon and Terraform made more than $4 billion through the sale of unregistered tokens, including LUNA and UST. In an April 19 filing in the U.S. District Court for the Southern District of New York, the SEC emphasized the need for a strong message against such misconduct. They want to permanently ban Mr Kwon from serving as an officer or director and require a ‘sworn accounting’ of his assets.

The SEC said these steps are necessary to prevent future violations.

“The defendants have shown no remorse for their actions and there is no doubt that they are in a position where further offenses are not only possible but may already be occurring.”

proposed fine

The proposed fines include $4.2 billion in clawback penalties, $545 million in pre-judgment interest, $420 million in civil penalties and $100 million in civil penalties for Terraform and Kwon.

The size of the proposed fine is unprecedented and signals the SEC’s serious stance. This follows a similarly hefty $1.8 billion fine proposed for Ripple and would surpass the $4.3 billion settled by Binance Holdings Ltd. over alleged violations of anti-money laundering and U.S. sanctions.

legal issues

Lawyers representing Kwon and Terraform disputed the SEC’s claims, arguing that the token sale took place outside the United States and did not violate federal securities laws. Although they initially questioned U.S. jurisdiction, they now advocate limiting the fine to $3.5 million (Terraform’s lawyers) and $1 million (Kwon’s lawyers).

The significant size of the fine reflects the SEC’s intransigence, especially considering the recent $1.8 billion fine proposed against Ripple. The proposed fine exceeds the $4.3 billion paid by Binance Holdings Ltd. to settle charges with the U.S. Department of Justice in November 2023, making it one of the largest corporate deals in U.S. history.

Disclaimer: This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.

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