Terraform Labs Seeks Penalty Reduction in SEC Fraud Case After $5.3 Billion Fine Proposal

• Lawyers for Terraform Labs and Do Kwon request reduced penalties after fraud conviction.
• The SEC proposed $4.7 billion in disgorgement and civil penalties for the collapse of Terra USD.
• The case outcome impacts cryptocurrency industry and regulatory actions.

Lawyers representing Terraform Labs and its co-founder, Do Kwon, have requested a reduced penalty following their clients’ recent conviction for fraud. They argue that a fine closer to $1 million is more appropriate than the $5.3 billion proposed by the U.S. Securities and Exchange Commission (SEC). This article explores the arguments put forth by Terraform Labs’ legal team and provides a comprehensive overview of the case.

The SEC’s Proposed Penalties

The SEC had recommended that Do Kwon and Terraform Labs pay approximately $4.7 billion in disgorgement and prejudgment interest. Additionally, the commission proposed civil penalties of $420 million for Terraform Labs and $100 million for Do Kwon.

Defense’s Argument for Lower Penalties

In response to the SEC’s proposal, Terraform Labs and Do Kwon’s lawyers filed a court document advocating for significantly reduced penalties. They contend that the suggested figures are excessively high and not proportionate to the nature of the offense. The defense team asserts that the Court should refrain from granting injunctive relief or disgorgement. Instead, they propose a maximum civil penalty of $1 million against Terraform Labs (TFL).

The Case: Terra USD and Its Collapse

The SEC’s charges against Terraform Labs and Do Kwon stem from the collapse of the algorithmic stablecoin Terra USD (UST), which occurred dramatically in May 2022. Algorithmic stablecoins employ market incentives and algorithms to maintain a stable price. Terra USD’s stability was linked to luna, a governance token. However, the UST experienced a severe crash, resulting in losses exceeding $50 billion.

Jury Verdict and Liability for Civil Fraud

In a recent development, a jury found both Terraform Labs and Do Kwon liable for civil fraud. The jury’s deliberations revolved around the SEC’s allegations that the defendants violated federal securities laws, engaging in fraudulent activities related to the buying and selling of Terraform securities. Judge Jed Rakoff had previously granted summary judgment in favor of the SEC, supporting their claim that Terraform and Kwon offered and sold unregistered securities.

Terraform Labs’ Response

Following the jury’s verdict, a spokesperson for Terraform Labs stated that the company was carefully considering its options and next steps. The legal team and stakeholders are now awaiting the Court’s decision regarding the appropriate penalties.

Conclusion

Terraform Labs and Do Kwon’s legal battle against the SEC continues as they seek a reduction in the proposed penalties for their involvement in the Terra USD collapse. The outcome of this case will have significant implications for all parties involved and may influence future regulatory actions within the cryptocurrency industry. As the legal proceedings unfold, it remains to be seen how the Court will weigh the arguments presented and arrive at a fair and just resolution.

Disclaimer

The information provided in this article is for informational purposes only and should not be considered financial advice. The article does not offer sufficient information to make investment decisions, nor does it constitute an offer, recommendation, or solicitation to buy or sell any financial instrument. The content is opinion of the author and does not reflect any view or suggestion or any kind of advise from CryptoNewsBytes.com. The author declares he does not hold any of the above mentioned tokens or received any incentive from any company.

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