With a hearing set for May 22 to consider proposed remedies in the United States Securities and Exchange Commission’s (SEC’s) case against Terraform Labs (TFL) and co-founder Do Kwon, the crypto firm is advocating for a markedly different judgment compared to what the regulator suggests.
In a supplement to Terraform’s opposition to the SEC’s motion for final judgment filed on May 1, lawyers representing the crypto firm contended that the SEC’s request for $5.3 billion in disgorgement, interest, and civil penalties was unwarranted. They argued that any disgorgement would need to be pursued from the Luna Foundation Guard (LFG), which is not a party in the civil case.
According to Terraform’s lawyers, the SEC failed to provide evidence that the platform’s or Kwon’s activities in the U.S. directly caused the losses cited in the civil case. They asserted that the SEC’s proposed remedies would effectively grant the regulator a “territorially unlimited injunction.”
Terraform suggested that a $1 million civil penalty would be more appropriate than the SEC’s multibillion-dollar proposal, emphasizing the lack of evidence tying Kwon’s actions to the United States.
Kwon, who is currently in Montenegro awaiting extradition to either the U.S. or South Korea, echoed Terraform’s stance on the proposed remedies. His lawyers argued that the SEC must demonstrate that Kwon engaged in conduct within the United States or conduct outside the U.S. that had a significant impact within the U.S. However, they maintained that Kwon’s involvement in the conduct underlying the SEC’s claims occurred entirely abroad.
Following a two-week trial, a jury found Terraform and Kwon liable for defrauding investors. All parties are expected to present arguments for proposed remedies before Judge Jed Rakoff on May 22. However, Kwon’s availability for the hearing remains uncertain due to his legal situation in Montenegro.
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